This week, the cryptocurrency market is in trouble: dual pressure from the macro environment and market adjustments | Weekly Market Insights Review

On the evening of August 29 at 8 PM, Matrixport's official YouTube channel live stream featured Daniel, the head of asset management at Matrixport, analyzing why Bitcoin dropped from $65,000 to $58,000 this week (August 25 to August 31) and how investors can achieve greater returns in the current context.

Affected by geopolitical issues and poor performance of tech stocks in the U.S., Ethereum also showed weakness, with decreased on-chain activity and weakened market confidence. Market sentiment shifted from optimistic to neutral or pessimistic, and institutions' profit-taking in the options market indicated a lack of confidence in a short-term rebound. He suggested that investors focus on holding major cryptocurrencies like Bitcoin and Ethereum, and use structured products like dual currency and snowball to lock in profits. At the same time, he advised maintaining caution and closely monitoring large transactions and market capital flows.

The live stream content is as follows:

Bitcoin's price plummeted from $65,000 to $58,000, causing the market to experience severe volatility. A one-sided upward trend is difficult to maintain, and investors face significant challenges in short-term trading. Investor sentiment quickly shifted from optimistic to neutral or pessimistic, necessitating a reassessment of market risks.

Analysis of Market Volatility Reasons

• Geopolitical and Selling Pressure Impact

Legal issues in Russia, particularly the arrest of the Telegram founder in France, have significantly impacted the crypto market. The price of TON chain tokens dropped sharply, triggering widespread market concerns and further exacerbating investor panic.

Recently, large Bitcoin transfer records on-chain have raised market worries about potential sell-offs, with investors generally believing that these large transfers may indicate that whales are liquidating assets, leading to further declines in Bitcoin prices. This situation amplified market selling pressure, increasing downward price pressure.

• Bitcoin Market Sentiment and Pressure

After Bitcoin's price retreated from its peak, market sentiment became more neutral, and the strength of any rebound was suppressed.

In the futures market, as Bitcoin's price fluctuated, arbitrage opportunities in the basis of futures contracts gradually diminished. The decline in arbitrage profits reflects the increasing difficulty of market trading, especially in volatile conditions, where the effectiveness of arbitrage strategies is significantly reduced, making it harder for investors to achieve stable returns through traditional arbitrage methods.

• U.S. Stock Performance and Crypto Market Correlation

The performance of U.S. tech stocks has had a significant impact on the crypto market, especially as tech giants like Nvidia failed to meet market expectations, undermining market confidence. This negative sentiment has transmitted to the crypto market, increasing investor concerns about the macroeconomy and further influencing investment decisions in crypto assets. Chinese concept stocks, including Pinduoduo, have seen significant declines, raising questions about the overvaluation of tech stocks and crypto assets. This skepticism further suppressed market risk appetite, leading investors to prefer reducing risk exposure in a high-volatility environment.

• ETF Fund Outflows and Market Selling Pressure

Since August 6, Bitcoin ETF funds have experienced the largest outflow, indicating that institutional investors hold a pessimistic view of the market's short-term outlook, suggesting not to be overly bearish. This large-scale capital outflow has increased selling pressure in the market, further deteriorating market sentiment.

It has directly led to intensified selling pressure in the market, with fierce competition between bulls and bears around the $60,000 mark, thereby expanding market volatility.

• Ethereum Performance and On-Chain Activity

Compared to Bitcoin, Ethereum's performance has been weaker. The lack of liquidity in Ethereum's ETF funds, coupled with a decline in on-chain activity, reflects a weakening market confidence in the Ethereum ecosystem. Continuous selling by institutional investors has increased market pressure on Ethereum, causing its price to continue to decline relative to Bitcoin.

Current Context of the Options Market and Institutional Behavior

By analyzing the order book of the options market, it can be observed that institutional investors lack confidence in a future one-sided upward market, leaning more towards profit-taking at highs. Orders indicate a conservative market expectation, with investors generally cautious about significant upward movements in the short term.

Institutional investors' profit-taking at specific price levels indicates their desire to lock in profits and reduce risk exposure. This trading behavior suggests that the market will maintain a volatile pattern, with a low likelihood of a one-sided upward trend.

Investment Directions to Consider

Focus on Volatility, Seek Stable Returns

By combining multiple market indicators such as options and futures basis, the cautious sentiment in the market can be further validated. These indicators show that the market maintains a conservative attitude towards short-term trends, prompting investors to adjust their strategies to reduce excessive risk exposure and ensure stable investment returns in an uncertain market environment.

In the current high-volatility market, structured products like dual currency and snowball have become effective tools to cope with market uncertainties. These products, through cleverly designed return structures, allow investors to lock in profits in a volatile market and reduce losses caused by market fluctuations. Dual currency products enable investors to receive different returns within various price fluctuation ranges, while snowball products provide fixed returns to investors when certain market conditions are triggered through flexible observation periods.

In a high-volatility environment, volatility trading becomes a key strategy. By utilizing options products with time value enhancement, investors can increase their tolerance for errors and enhance strategy flexibility in a volatile market. This trading strategy allows investors to still achieve stable returns through reasonable positioning and timely strategy adjustments during significant market fluctuations.

Asset Allocation Towards Mainstream Assets, Focus on Risk Resistance

In the current high-volatility market, it is recommended that investors concentrate their assets on major cryptocurrencies such as Bitcoin and Ethereum. The market share of major cryptocurrencies continues to rise, reflecting that institutional investors prefer assets with strong risk-hedging properties when facing market uncertainties. Compared to other mid- and small-cap tokens, these major cryptocurrencies exhibit relatively lower volatility and higher market recognition, thus demonstrating better risk resistance during market fluctuations.

As market uncertainties increase, the hedging advantages of major cryptocurrencies become increasingly evident. In a context of declining risk appetite, investors place greater emphasis on the safety and stability of their assets, opting to allocate more funds to major assets like Bitcoin and Ethereum to avoid systemic risks.

Utilize Tools to Lower Costs While Enhancing Risk Management

Matrixport's Decumulator product provides miners and large investors with the opportunity to reduce holdings at a premium when market prices exceed the agreed price. This product allows investors to achieve stable cash flow amid market fluctuations while maintaining long-term asset appreciation. This strategy is particularly suitable for investors looking to gradually reduce holdings at market highs, allowing them to lock in some profits while still participating in potential market upswings.

By financing through a low-cost collar strategy, investors can obtain financing costs as low as 2% without needing to add margin. This strategy not only reduces the cost of capital usage but also provides effective downside protection for investors, enabling them to flexibly respond to capital needs during market fluctuations and avoid the risk of forced liquidation due to severe market volatility.

Matrixport's collar strategy products offer investors high loan-to-value financing options, allowing them to obtain substantial financing without triggering margin calls. This financing method not only lowers investors' capital costs (as low as 2%) but also increases capital utilization, enabling them to manage capital needs more flexibly during market fluctuations. Compared to traditional high-cost borrowing, the collar strategy serves as an ideal tool for coping with market volatility with lower interest rates and flexible financing conditions.

The collar financing scheme also helps investors protect their downside risks by setting upper and lower strike prices, ensuring that they do not face forced liquidation risks even during significant market downturns, thereby better maintaining the stability and security of their investment portfolios.

Conclusion

In the current market filled with uncertainties, structured products have become essential tools for investors to ensure the preservation and appreciation of their assets. By selecting structured products that align with their risk preferences and investment goals, investors can seek certainty in returns amid market volatility. Matrixport's product design incorporates various market strategies, providing investors with diversified options to navigate complex market environments, ensuring their investment portfolios can achieve long-term stable growth even in volatile markets.

For more exciting content, please check the YouTube replay: https://www.youtube.com/live/x_qcPDFb3G4

Disclaimer: The above content does not constitute investment advice, sales offers, or purchase offers to residents of the Hong Kong Special Administrative Region, the United States, Singapore, or other countries or regions where such offers or invitations may be prohibited by law. Digital asset trading may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided herein.