One day, after the cow returned, it washed its face under the waterfall: How to survive in the volatile cryptocurrency market?
In the current market with extreme volatility, it is difficult to achieve long-term profits solely by luck; only investors with highly specialized trading strategies can survive in extreme environments and potentially profit from them.Original author: Jordi Alexander, Founder of Selini Capital
Source: Jordi Alexander's X account
Compiled by: Yuliya, PANews
After the largest single-day market capitalization increase in history, just one day later, we witnessed the second-largest single-day decline in history. This extreme volatility has caught market participants off guard.
Many traders have suffered significant losses in this environment. On one hand, due to panic or technical breakdown signals, they cut losses and exit the market at the bottom; on the other hand, driven by a brief market rebound or positive news, they blindly chase prices at the top, ultimately facing a second market crash.
In the bull market of November 2024, the market expanded rapidly overall, and most investors tended to go long, making it relatively easy to profit. However, in the current market characterized by extreme volatility, relying solely on luck is insufficient for long-term profitability; only investors with highly specialized trading strategies can survive in extreme environments and potentially profit from them. They typically adopt the following strategies.
Cash is King, Liquidity First
In a highly volatile market, holding sufficient cash is crucial, even if it means sacrificing some expected returns (EV) to ensure liquidity.
Take the investment management firm Jane Street as an example; this institution has long invested in purchasing deep out-of-the-money put options. Even when facing sustained short-term losses, its ample liquidity allows it to acquire undervalued assets at low prices during market crashes. Compared to traditional financial markets, the cryptocurrency market has a higher prevalence of leverage and more severe liquidity mismatches, making this strategy particularly important.
Some top traders tend to gradually reduce their positions in the "shoulder" area during sharp market rallies, rather than waiting for the extreme peaks in the "head" area. Although they may miss some upside in the short term, this strategy allows them to recoup funds and improve their ability to re-enter at more attractive price ranges, which is more advantageous in the long run.
Price-Centric, Not Time-Centric
Top traders are typically not constrained by trading time frames but define trading ranges based on price. For example, during the last bull market, trader High Stakes Capital shared a screenshot of an eight-figure profit from his FTX account, with positions established just two months prior. This indicates that in extreme market conditions, time is not a key variable; the core lies in clearly defined buy and sell ranges.
Trading logic should be based on the following two points:
Identify buy prices with clear value support, avoiding decisions influenced by short-term fluctuations.
Set clear risk-reward ratios and target exit prices, executing trades decisively when the market reaches the target.
Then maintain patience; whether it takes hours or weeks, execute the trade once the price hits the target. At the same time, continuously adjust your "ideal entry price" and "ideal exit price" based on market changes.
If one is too fixated on the time dimension, such as "only day trading" or "only holding for multiple weeks," trading performance is bound to be limited. The core mindset of top traders is: "Buy low, sell high," with the holding period determined by market fluctuations.
Calm Execution, Strict Adherence to Trading Plans
In extreme market environments, position sizes must match one's capital strength. If the position is too large and the market continues to decline, traders may experience psychological imbalances due to unrealized losses, leading them to deviate from their original plans.
The current market still possesses numerous positive factors and ample liquidity, making it difficult to enter a prolonged multi-year bear market. This macro judgment allows some investors to maintain confidence even during market downturns. At the same time, they do not expect a full-blown "altcoin season," so they gradually take profits during market upswings and patiently wait for the next more attractive entry opportunity.
In market decision-making, some investors adopt a psychological strategy when deciding whether to sell, asking themselves: Is there a high probability that the current price will fall again? If the answer is affirmative, it indicates that this point is not the best entry opportunity, and it is advisable to remain on the sidelines, waiting for a better risk-reward ratio window to appear.
Market Practice: Trading Strategies in Volatile Markets
Taking Bitcoin as an example, when the price falls from $100,000 to $90,000, some traders begin to build positions in batches. They gradually buy in the $90,000 range, reaching their expected position size by the time it hits $82,000, and are willing to hold for a longer period.
However, the market further dips to $78,000-$79,000, leading to a short-term increase in unrealized losses. Yet, from a risk-reward perspective, the investment value at this price level actually increases, prompting some investors to free up additional funds to increase their positions rather than passively stop-loss, provided they do not believe the market will enter a long-term bear phase based on long-term market structure analysis.
Ultimately, the average holding cost decreases to $83,000-$84,000, and if the market recovers to $100,000, it will yield a relatively ideal return.
As the market rebounds, the bottom position at $78,000 is partially liquidated at $85,000 to ensure there are still funds available to respond to a potential second pullback. Meanwhile, most core positions are still held as planned.
If the market does not provide a second pullback opportunity and rises directly, then all profits are taken in the $87,000-$93,000 range, waiting for the next ideal entry price. If the market breaks above $95,000 but does not pull back to $88,000, then adjust the expected entry point to $90,000. When the market falls back to $90,000, buy in batches again and adjust strategies based on market trends.
