Up or down: How will traders respond to the new round of volatility?

Recently, volatility in the cryptocurrency market has attracted widespread attention, especially the sharp drop in the prices of Bitcoin and Ethereum. After failing to break through $70,000 in late July, Bitcoin has experienced several key declines and its price has now fallen back to about $58,000, while Ethereum has fallen to around $2,500. This market turmoil has not only hit investor confidence, but also caused widespread anxiety and uneasiness.

The uncertainty of the global macroeconomic environment, such as high unemployment in the United States, pressure on the yen to raise interest rates, and the vacillation of the Federal Reserve's policy, has made market sentiment worse. According to CoinMarketCap, in recent weeks, the market value of Bitcoin has evaporated by hundreds of billions of dollars, and the overall market value of the crypto market has also fallen by nearly 20%. The sharp change in market sentiment has caused many investors to withdraw their funds and wait and see under huge uncertainty.

In the face of such market turmoil, BlockBeats interviewed several traders and KOLs in the industry to understand their views on the current market situation and the strategic adjustments they have made in this uncertain environment.

What caused the market crash?

In this dramatic market decline, global macroeconomic factors and internal problems in the crypto market have become the driving force behind the market's violent turbulence. Traders analyzed the causes of this storm from different perspectives, and their views have both resonance and differences.

Many traders interviewed mentioned that the deterioration of the macroeconomic environment is one of the main reasons for the market crash, especially factors related to US economic data and monetary policy, which are the main reasons for the sharp decline in the crypto market. Both the market panic caused by the yen's interest rate hike and the change in the Fed's expectations for rate cuts are considered to be important drivers of the deterioration of market sentiment.

"This decline follows the collapse of the Japanese market. In addition, the poor liquidity in summer has amplified market fluctuations, and both rises and falls will exceed expectations." 雨中狂睡 told BlockBeats. He also mentioned that "black swan" events in the global political situation, such as international conflicts, the results of the US election, and the policy changes of the Federal Reserve, may become the fuse for further market declines.

WOO's Chief Operating Officer Willy Chuang analyzed the deep-seated reasons for the market crash from a macroeconomic perspective. He pointed out that the US unemployment rate rose to 4.3% in July. This data triggered Sam's Law, indicating an increase in the risk of economic recession, causing market panic to spread, and Bitcoin prices fell sharply. Willy Chuang also mentioned that Buffett's Berkshire Hathaway significantly reduced its holdings of Apple shares in the second quarter financial report released on August 4, which also had an important impact on the market. "Buffett's reduction of holdings has had a significant impact on U.S. stocks and investor sentiment, leading to a tightening of market liquidity. Bitcoin and Ethereum are very sensitive to liquidity, which further exacerbated the market's decline."

The slow pace of the Fed's interest rate cuts has also increased market uncertainty. Although the market's expectations for a rate cut in September are close to 100%, the extent and speed of the rate cut are still controversial, which makes the market more cautious about the future. "At present, we need to focus on the recent performance of the US stock market. If the market expects a recession, the US stock market will have a drastic adjustment. If the recession is controllable within the expected range, BTC's short-term gold pit may form. What we can do now is to observe market changes and wait for opportunities." Willy Chuang added.

Big Orange's analysis echoes Willy Chuang's views. He believes that the instability of the global economic environment, especially the weakness of US economic data, is an important reason for the market crash. He pointed out that when Bitcoin approached $70,000, many governments chose to sell their Bitcoin holdings at high points, which directly suppressed the market's upward trend. "This selling behavior reflects the concerns of governments about the economic outlook. They choose to sell Bitcoin at high points to avoid the loss of state-owned assets." Dachengzi explained that this selling pressure further exacerbated the market's decline.

However, Daewoo believes that although the yen's interest rate hike has triggered panic in the global market, this is only a superficial reason. He emphasized the problems within the crypto market, especially the lack of innovation and the continued selling pressure from VCs. "The lack of innovation in the currency circle has made only Bitcoin and Ethereum through ETFs have real value, while other altcoins lack narratives that can attract the market." Daewoo pointed out that the continued selling pressure from VCs is another important reason for the continued decline in the market. He explained that due to the increasingly negative consensus on the value of altcoins among project parties, retail investors, exchanges, etc., there has been huge selling pressure in the market.

For example, when the market peaked in May, the total value of altcoins unlocked that month was nearly $5 billion; in contrast, the total institutional buying in the past six months through such epic events was only more than $17 billion. This imbalance between supply and demand has caused the market cash funds to be unable to withstand such huge selling pressure, which in turn has driven prices down. "There are many project parties like this. Everyone has set up projects in the bear market and is waiting for the bull market to make a fortune. When everyone thinks so, they suddenly find that the market can't take it," Dayu told BlockBeats.

In addition, Dayu also mentioned that the involution of meme coins has further exacerbated the weakness of the market. He believes that although meme coins can attract traffic, they do not create value themselves. Instead, they plunder the value in the market in a zero-sum game, which has led to a continuous decline in the vitality and funds of the currency circle. "The meme coin without wealth effect is just a phenomenon, and what it reflects is the gradual depletion of funds in the currency circle." He added that as the economic environment deteriorates in various places, there may be more liquidation chips entering the market that are higher than market expectations in the future, such as the Plustoken case, which is just the tip of the iceberg. These potential liquidation pressures make the market more fragile.

Options trader Sober Likun's views are partially consistent with Daewoo's, and he emphasized the problems of insufficient internal narratives in the crypto market and overvaluation of new projects. He pointed out that the current market funds are difficult to support so many newly issued projects, which further increases the downward pressure on the market. At the same time, he also emphasized the high degree of linkage between the crypto market and the traditional financial market, especially when the US stock market is at a mid-to-high valuation. If there is a valuation adjustment, Bitcoin and Ethereum will not be spared.

"The main reason for this round of decline in the crypto market is the volatility of US stocks and commodities (such as gold and crude oil), which are affecting the performance of the crypto market."Sober Likun believes that the high degree of market linkage makes crypto assets more unstable when traditional markets fluctuate.

AC Capital researcher and the initiator of the "Ponzi Three Plate Theory" Crypto Wei Tuo put forward a relatively simple but unique view: "The confusion of expectations has led to a large number of profit-taking orders in the market, which is the main problem of this market decline." His view emphasizes the importance of internal market expectation management from another perspective.

Expectations for future market trends

Traders have different views on market trends, but generally believe that September will be a key month. Daewoo and Yuzhong Kuangshui are relatively optimistic about the medium- and long-term prospects of the market, believing that with the improvement of the external environment, the market is expected to recover in the second half of next year. Sober Li Kun, Willy Chuang and Dachengzi are more concerned about short-term risks and market volatility, and suggest that investors pay close attention to key economic indicators and policy changes. Crypto Wei Tuo reminds investors that in the current complex market environment, they cannot judge based on fundamentals alone, but also need to consider the impact of broader political factors.

雨中狂睡 directly expressed his bullish attitude towards the future market. "I have told my group friends before that I am not optimistic about Q3. Summer is always a period of low liquidity. Q4 is worth looking forward to. As time goes by, these uncertainties are slowly being determined." He believes that although the current market liquidity is poor, market sentiment has improved compared to last year, which may prompt market prices to react in advance before October. "August should not be a good time to trade, September will be better."

Similar to 雨中狂睡, Willy Chuang also believes that there will be a large rebound in September, and the future trend of the market will depend on two core factors: whether the yen continues to raise interest rates and the extent of the US economic recession. He pointed out that the market's concerns about the US economic recession and the potential impact of the yen's interest rate hike are the main reasons for the current market instability. "Based on these indicators, the U.S. economy will be in good shape in the next 3-6 months, so it is expected that as the interest rate cut expectations gradually come into effect, the U.S. stock market will return to an upward trend; the Federal Reserve will cut interest rates in September, and cryptocurrencies are expected to rebound significantly in September after being fully adjusted in August."

Daewoo is optimistic about the longer-term market situation and predicts that the bull market may start in the second half of next year, for example. He believes that the external environment should begin to ease at that time. "The US dollar interest rate cut and the Japanese yen interest rate hike are both certain to happen. Once they happen, the stock market and other things may plummet due to various chain reactions. According to historical experience, when the US dollar interest rate cut ends within a few months and enters the low-interest era, the stock market will also hit the bottom, and it will be time to sing and dance again." He said. At the same time, Da believes that the hope for the next round of bull market may not be on Ethereum and Solana, but that Bitcoin and its ecosystem may become the main driving force of the market. "For me personally, I will maintain 30%-50% of the on-site positions, mainly holding BTC, without prediction or getting off the train."

Dachengzi is more neutral about the future performance of the market. He pointed out that the volatility of this decline may continue for some time, possibly for weeks or even months, mainly depending on the direction of the global economy and policies. For the rest of the year, the crypto market may continue to find a balance point in high volatility, and there may be ups and downs. Key indicators of particular concern include interest rate decisions of major global economies, the progress of cryptocurrency ETFs, and regulatory trends of some major cryptocurrency exchanges. These factors may have a significant impact on the market, so pay more attention to changes in these aspects in the future.

In contrast, options trader Sober Li Kun is more cautious about the short-term trend of the market: "At present, it is difficult for the US stock market to stabilize in the medium and short term, and a slowdown in decline is a high probability event. It is necessary to observe whether the overall macro interest rate hike in September will bring new liquidity increments beyond expectations." He believes that the market's decline may continue until the US stock and US bonds stabilize, and during this period, the market's downside risk remains high. He pays special attention to several key events in the next few months that will have a significant impact on the market, including the Fed's rate hike progress, the Bank of Japan's rate hike, policy changes brought about by the US election, and block trading in the options market.

Fiona's answer was more "pessimistic": "I think the market will be more difficult to trade in the second half of the year. The volatility is high and it is difficult to have a sustained rise. If there is a deeper correction, I will increase my position. The current strategy is mainly cash. I am more concerned about the two events of interest rate cuts and elections. There are recession expectations, but I still think it should be a soft landing."

Crypto Wei Tuo's point of view is relatively unique. He emphasized that we should not rely solely on classic fundamental analysis to judge market trends. "Now it is actually a situation of stagflation. Everything is guided by the US election and serves politics." He believes that in the current market environment, political factors may dominate market trends more than economic fundamentals, so investors need to remain flexible and vigilant.

How Traders Are Fighting the Storm

As market volatility and uncertainty increase, traders have adjusted their investment strategies to cope with the current complex situation. Although everyone's strategy is different, whether it is reducing risk exposure, increasing defensive positions, or maintaining a flexible investment approach and hedging risks through options, overall, these top traders have generally adopted a more robust and cautious strategy in dealing with the current market volatility. The following are specific descriptions of their strategy adjustments by several traders.

Daewoo said that since April, he has switched 80% of his positions to a robust interest return strategy, which has brought good returns. However, recently, with the expiration of interest-bearing positions, he has made more adjustments to his strategy. "For example, I bought Tesla at around 180, and didn't sell it when it rose to 270, but sold the principal at 220." He mentioned that during this period, he got on and off BTC and ETH many times, but he is now tired of the market volatility. "Now, I keep about 35% of my on-site positions, mainly BTC, and I won't move." For the future, he said that if the market falls further, he will choose to buy on dips; if the market remains stable, he will continue to arbitrage and learn from Buffett's patience, "Buffett can wait for a few years just for an opportunity."

Sober Li Kun also adopted a conservative strategy. He converted part of his crypto assets into US dollars in May and implemented a once-a-year rebalancing strategy. He said that the current crypto assets are mainly concentrated on core targets such as BTC and USDC. In addition, he began to buy put options in June, laid out "anti-fragile" positions, and continuously rolled positions to cope with potential market risks. “This way, if there is a ‘black swan’ event like last Monday, I can reduce losses and even capture additional gains.” He also mentioned that although he is cautious about the market performance during the BTC halving cycle, he is ready to deal with it. “If this round of BTC halving does not trigger a violent bull market, then wait for the next cycle.”

Compared with the previous “SOL maximization”, the current Fiona will also actively try new projects, but much less than before, “It is more cash-based, and the main cryptocurrency held is BTC, followed by Sol, BNB, and ETH. The funds for U.S. stocks are mainly in U.S. Treasuries, and it is expected that interest rate cuts will lead to an increase in U.S. Treasury ETFs. I bought the bottom of the Nasdaq when it fell a while ago, and I’m still holding it recently.”

Sleeping in the Rain said that his strategy has fewer adjustments, and he mainly operates based on his own time cycle. "I will reduce the frequency of transactions in Q3, and increase some transactions in Q4." He said that in terms of altcoin investment, he will only hold those projects that can bring real returns for a long time, such as banana, and those that can be related to large institutions such as BlackRock, and other projects will not be held for a long time. "As for meme, I prefer some large-cap meme projects on Solana, and I will not participate in low-cap pvp gambling."

Big Orange has made more strategic adjustments in the current market environment, mainly focusing on risk management. "First of all, I pay more attention to risk management and do more options-based hedging protection strategies to avoid too much loss when the market plummets." He also mentioned that he further diversified his portfolio and increased the proportion of USDT positions to balance the overall risk. In addition, he is also looking for trading opportunities in the short term, taking advantage of market rebounds or pullbacks to make some short-term operations. "Although the market is unstable now, I will still pay attention to those crypto projects with long-term potential, especially those with actual progress in technology and application." In general, his strategy is to be more robust and flexible, act according to circumstances, and avoid taking too much risk.

Crypto Wei Tuo's strategy is more conservative and cautious. He said that in the current environment, he mainly focuses on short positions and will not pursue the final return. "I will not make the last penny, and my financial management is mainly based on LP strategy, while holding a lot of JLP." This strategy shows that he is highly vigilant about the uncertainty of the market outlook.