Trump's tariff policy has caused a market crash of 203. How is your position? What might the market trend be next?
Source: Talking about Li and Talking about the Outside
Yesterday (February 3rd, Beijing time) was the beginning of spring. There is a traditional custom in folk culture called "Taisui Douchun," which means avoiding spring. It is believed that during the beginning of spring, the energy field changes, which may have adverse effects on people. The year 2025 is the Year of the Snake (Yisi), and according to folk beliefs, those born in the years of the Snake, Pig, Monkey, and Tiger are considered to offend Taisui, hence the need to avoid spring.
How to avoid spring? You can find a quiet or enclosed place to avoid external disturbances, maintain a calm mindset, and avoid emotional fluctuations.
However, I guess many people didn't manage to avoid it yesterday, as the crypto market experienced a significant crash comparable to March 12, with BTC dropping to around 91,500, a decline of about 6%. ETH was even more dramatic, with a single-day drop of over 25%. As for other altcoins, describing it as a bloodbath wouldn't be an exaggeration.
From the latest on-chain data, in the past 24 hours, a total of 719,347 people were liquidated across the network, with a total liquidation amount of 2.289 billion, including 1.819 billion in long positions and 470 million in short positions. As shown in the figure below.
Yesterday morning, I was still focused on writing, and a few hours later, I came back to find it had already crashed… Unfortunately, I missed the chance to enjoy the scenery at 2100 for Ethereum.
I remember on March 12, 2020, there was also a significant crash, with Bitcoin dropping from around 7900 to about 3800, a decline of about 52%. ETH dropped from around 200 to about 86, a decline of about 57%. (Different data statistics platforms may have slight variations; historical data can be checked by everyone.)
However, this time's drop on February 3 is somewhat different from March 12. Firstly, BTC's performance was relatively strong, and secondly, ETH's decline was sharper compared to BTC. Although I personally remain optimistic about ETH's long-term development and have discussed Ethereum topics several times in recent articles, ETH in this cycle has been unpredictable, consistently disappointing expectations. Recently, I've received quite a bit of criticism in the comments for writing about Ethereum, and today I blocked several users who came in just to insult. Alright, I'll try to restrain myself in the coming days and mention Ethereum less to avoid further angering the crowd.
As I write this, I suddenly recall a phrase hanging on the wall in my former employer's office: "Find hope in despair, and life will eventually shine." This phrase seems to express my personal expectations for ETH quite well.
1. How might the market move next?
I actually enjoy such waterfall opportunities. In my previous article (February 3), I casually shared my planning for this cycle, where you can see that I have maintained a 10% C-level position to cope with market conditions like March 12 and May 19. However, the drop on February 3 didn't seem shocking enough, and since I was focused on writing for a few hours that morning, I didn't make any supplementary trading operations.
Moreover, regarding major drops like March 12, May 19, and February 3, we don't need to deliberately search for reasons, as looking for reasons afterward does not help our positions. As mentioned in previous articles: We deeply sympathize with those who were liquidated, but for the market, liquidations are healthier.
If you've experienced previous events like March 12, or if you look at the K-line, you can see that each extreme market situation is accompanied by massive liquidations. After the liquidations and a period of adjustment, the market often welcomes a unilateral upward trend or even breaks through new ATHs. (Historical performance does not represent the present and cannot directly predict future performance; DYOR)
You dared to go all-in on Bitcoin at 100,000, you dared to go all-in on ETH at 4000, and you dared to go all-in on MemeCoins that could go to zero at any time… So what's happening now? A rare waterfall opportunity that comes once every few years, and you're hesitating?
Of course, maybe some people aren't hesitating, but because they were too bold before, always recklessly going all-in, they now find themselves unable to move.
As of the time of writing, the market has started to rebound. Although ETH hasn't even reached 2800, BTC has returned above 100,000. Yesterday, I also saw a partner in the group share an interesting comparison, showing that ETH indeed seems to have never disappointed in terms of disappointment, haha. As shown in the figure below.
However, even though there is a rebound, don't rush to go long just because of it. In such a volatile market, going long or short can easily lead to self-sabotage. If you still have positions, you can take advantage of a drop like February 3 to pick up some cheap spot assets. If you don't have positions, then reflect and plan your position management.
As for the possible market trends ahead, I'll directly quote some opinions from partners in the group (to protect their privacy, names/nicknames are omitted):
A) The weekly level shows a "bearish engulfing," and combined with MACD, it may continue to correct. Additionally, the 3-day level also shows a "bearish engulfing," and the short-term outlook is not optimistic, as the upward trend line has been broken. Let's wait and see the results. As shown in the figure below.
B) There will be another wave from the 8th to the 18th, and be cautious on the 4th.
C) Looking purely at fundamental changes, the U.S. tariff policy is a direct cause, but the background is the reduced expectations for interest rate cuts. In the context of lowered interest rate cut expectations on December 20, the fundamentals have changed, and such negative news will be amplified. Combined with the "tiger descending the mountain" and the monthly pinbar technical analysis, as well as the impact of AI bursting the U.S. stock bubble on crypto, this has also been discussed in the group recently, and is one of the reasons for the significant drop in AI stocks.
Of course, other partners have also expressed their personal views. In short, the market is volatile, and so are people's sentiments. Some remain pessimistic, while others stay optimistic. Ultimately, the decision to participate in buying/selling, what to buy/sell, and how to buy/sell rationally… these decisions rest with you.
I personally am not good at providing trading guidance, nor do I want to do so. I can't offer others too many clear buy/sell suggestions. My main role is to remind everyone to manage their positions and risks through this platform, and to provide some personal experiences, views, or thoughts related to the crypto market, that's all.
Now the market has reached a new crossroads. Some will choose to get off, some have already been thrown off, and some will take the opportunity to get on. What is your situation?
Anyway, I personally remain relatively optimistic. I won't be thrown off (though I did gradually get off in December last year, which I mentioned in the February 3 article). I will continue to hold the view expressed in previous articles: we have not yet entered a bear market, and this bull market has not completely ended. At least, I have not seen a bear market for Bitcoin at 100,000 (maybe I will see it in five years). However, the risks will increase as time goes on, and the time left for this bull market is getting shorter. Based on your positions and risk preferences, just continue to maintain your existing strategies and pace.
The best operation during this bull market phase is to sell in batches. Preserving wealth during a bull market is harder than creating wealth. Especially for newcomers, don't casually use leverage, don't casually trade contracts, and don't recklessly go all-in to catch the bottom. These could lead to your assets going to zero or getting stuck at the top, feeling the cold wind.
The core logic or play of the market is to make as many people lose money as possible. Therefore, we see various so-called news events. The more institutions and people participate, the more complex the market cycles become. This is why the bull market in 2017 was relatively easier to profit from than in 2021, and the bull market in 2021 was relatively easier to profit from than the current bull market.
Especially in the current environment of low consumption, most people (mainly retail investors) no longer have, or will not put out that much capital for investment, especially in high-risk areas. Life is already tough, let alone investing.
Of course, this excludes gamblers and those with fantasies of getting rich overnight. But honestly, rather than gambling in this field, why not go directly to Macau? At least there, you can play without having to think too much, without sitting at a table bored staring at the chain, and without spending time and energy on project research. Although the outcomes of gambling may be the same, at least in Macau, you can lose clearly.
2. Let's talk about the U.S. tariff issue that everyone has been paying attention to these days.
In fact, the U.S. tariff policy has not been a recent development. Trump mentioned increasing tariffs before he took office, and this expectation has always been there. It's just that the recent tariff policy has provided the market with a sufficient reason to decline. The market needs to clear leverage, but declines still need reasons, and the implementation of tariffs is a good reason.
But can you say that the impact of tariffs on the economy (the U.S. economy) is immediate?
This is actually about finding a balance between short-term pain and long-term gain. Yes, tariffs can promote domestic production in the U.S., but the ultimate transmission effect may take years. It's not that if a tariff policy is implemented today, it will immediately enable domestic companies to produce the necessary goods.
From a short-term perspective, the tariff policy will indeed directly lead to a strengthening of the DXY (U.S. dollar index) and a decline in various risk assets (stock market, crypto market). However, from a long-term perspective, tariffs may reignite inflation risk, causing companies and consumers to face rising costs and shrinking profits, leading many funds to choose to hedge.
As for how significant the impact of these short-term and long-term dimensions will be, it may depend more on the trade volume between the U.S. and other countries (such as Canada, Mexico, and China). If the trade volume is large, the impact, or the impact on the global economy, will certainly be significant, which will greatly disrupt market liquidity.
Currently, Trump's tariff war has just begun. Note that it's just the beginning, not the end, and no one knows what else Trump will do regarding tariffs. It is said that the U.S. may continue to increase tariffs on the EU, and under such "expectations," it seems reasonable for the market to trigger a crash.
3. A crash is not scary; what's scary is when your positions disappear.
For retail investors (especially those who have experienced 2-3 cycles of bull and bear markets), what does a drop like February 3 mean?
The 94 crash in 2017 (Bitcoin dropped over 40% in a few days), the March 12 crash in 2020 (Bitcoin dropped over 50%), and the May 19 crash in 2021 (Bitcoin dropped over 30%)—we have all experienced these.
A drop like February 3 also happened last year. On August 5, 2024, Bitcoin's price dropped from 58,200 to around 49,500 in one go, with a single-day decline even larger than yesterday's. I wonder how many people still remember that situation.
A crash is not scary; what's scary is when your positions disappear. Only after a crash, when most long positions have been liquidated, can the market continue to move forward after some consolidation. Also, don't forget some catalysts we've discussed in previous articles, including:
More altcoin ETFs may still be approved this year.
The expectation for the U.S. crypto strategic reserve plan still exists.
More countries are exploring the issue of cryptocurrency reserves.
Large institutions are still deeply involved and laying out in the crypto field.
And so on…
Just to mention the situation in El Salvador a couple of days ago, don't be misled by some sensationalist media claiming that El Salvador caused the market crash. They were still buying Bitcoin on February 1 and announced the cancellation of Bitcoin's legal tender status on February 2. Honestly, if someone offered me a huge loan on the condition that I acknowledge that the U.S. belongs to China, I would definitely agree without hesitation; getting the money is more important than anything else. As shown in the figure below.
In summary, don't let panic emotions take over your positions. Stick to your strategy and plan, and continue to focus and think. In prosperous times, see the bubbles; in excitement, think of the crises; and when everyone is panicking, take the positions you can afford to risk and bravely seize the opportunity.
