Opportunities and Challenges After the Crypto Market Storm: Market Rebound or Another Bear Market Trap? | Weekly Market Insights Review

On the evening of August 22 at 8 PM, Matrixport's official YouTube channel live stream featured Daniel Yu, the head of asset management at Matrixport, who delved into the opportunities and challenges in the current cryptocurrency market. He provided investors with a comprehensive market analysis and strategic advice to help users make more rational investment decisions in the current complex market environment.

Key Highlights from the Live Stream

Daniel analyzed the signals of market rebound for the week (August 18 - August 24), pointing out that the recent U.S. employment report may have overestimated the degree of economic weakness, thereby raising market expectations for a shift in Federal Reserve policy. This expectation could temporarily drive a rebound in risk assets like Bitcoin, but investors should be cautious to avoid falling into a bear market trap. Additionally, the massive Bitcoin transfer event from Mt. Gox may reignite market concerns about selling pressure. Investors are advised to closely monitor large transactions to assess their potential impact on market liquidity.

Market Overview

Recently, the price of Bitcoin quickly dropped from nearly $62,000 to $57,000, showing a range-bound trend. The market atmosphere is gloomy, and research reports indicate a decline in investment returns, particularly poor performance in quantitative and arbitrage strategies. Large institutions, such as Mt. Gox and the U.S. government, selling Bitcoin and tokens have affected the market, leading to increased price volatility. The market seems to be influenced by institutional quantitative selling strategies, with prices often falling after reaching new highs.

Perpetual Contract Funding Rate Hits Bottom

• The funding rate for perpetual contracts has reached its lowest level in recent years, even turning negative. Short-term yields are low, but long-term yields remain high, reflecting market uncertainty in the short term.

• Short selling pressure is significant, with selling occurring every time prices rise, and market sentiment has yet to recover.

Ethereum Performance and Short-Term Bearish Pressure

• Ethereum has recently performed poorly, with low on-chain activity and price. Institutions tend to engage in short selling in the futures market rather than selling spot.

Cryptocurrency Market Expectations and Bitcoin Supply-Demand Relationship

• Bitcoin is viewed as digital gold, with its valuation heavily influenced by supply-demand dynamics and macroeconomic factors. In contrast, the valuation of Ethereum and other assets relies more on on-chain activity and operational performance.

• After experiencing bottom support, the current market may have upward momentum, but attention should be paid to the impact of institutional sell-offs and interest rate cut expectations. The Bitcoin market has not broken through previous highs, while the U.S. stock and gold markets are performing strongly.

• Bitcoin's long-term returns benefit from limited supply and changes in monetary policy, while assets like Ethereum face different valuation challenges. For investors seeking stable returns, quantitative strategies and structured products offer good options. When choosing, attention should be paid to the maximum loss and return range of the products.

Impact of Federal Reserve Rate Cuts on the Crypto Market

• Since the halving, Bitcoin's price has not met market expectations, and investors are pinning hopes on rate cut expectations. Currently, the probability of a rate cut on September 24 has significantly increased, but there is still controversy over the extent of the cut.

• Through rate cuts, the market has gained a support tail after reaching a bottom, which may provide upward momentum and some positive expectations, but it will not lead to a significant surge or directly initiate a bull market, as the related impacts have already been priced in.

• This rate cut, apart from Bitcoin, has not truly attracted global users for some tokens or projects; instead, a large amount of institutional capital or quantitative strategies may achieve absolute returns. Institutional investments have advantages over retail investors in terms of personnel, trading teams, trading systems, and information advantages, making wealth management a good choice currently.

Current Market Asset Allocation

Utilizing High Volatility Markets for Profit

• Investment strategies for high-volatility assets: Analyze the nature of high volatility characteristics in the crypto market (similar to tidal power generation) and explore how to achieve returns through strategic investments in the high-volatility crypto market.

• Choosing professional institutions: A large amount of quantitative trading in the current market may be machine-managed, and frequent trading significantly increases the probability of errors. Therefore, using quantitative tools or products from professional institutions can reasonably mitigate risks and engage in some volatility investments.

• Structured products: During market downturns, investors are advised to utilize structured products and quantitative strategies. The characteristics of Matrixport's shark fin, snowball, dual currency, and other products allow for leveraging the market's high volatility.

Segmentation of the Crypto Market and Investment Allocation

• Segmentation of the crypto market: The crypto market is divided into bull mid, peak, bear mid, bottoming, and bull early stages. Currently, most investors' expectations in the market are for bull early and bull mid, and have not yet reached the peak.

• Market expectations and investment advice: Based on the current market situation, it is recommended that investors choose some accumulation products for personalized combinations according to their risk management needs, such as structured products (like shark fin, snowball, dual currency, and trend smart profit), to help investors achieve stable returns amid market fluctuations.

• Core-satellite strategy: Currently, a core-satellite strategy can be adopted, with the majority of funds invested in stable principal-protected products, while a small portion is allocated to high-yield structured products. By combining different wealth management products, strategic investments can achieve returns in a high-volatility market. For example, allocate 70%-80% of assets to principal-protected products, with the remaining 20%-30% in relatively high-risk, high-return wealth management products to achieve risk management.

Option Strategies and Risk Management

• Option strategies and risk management: Compared to direct collateralized lending, the financing rate for USDT financing through option strategies is as low as around 4%, which can help miners and investors concerned about margin calls and tail risks reduce capital costs and mitigate risks in a high-volatility environment.

For more exciting content, you can check out the YouTube replay: https://www.youtube.com/watch?v=Qwzworphd_w