Not desperate enough, nor crazy enough

Source: Talking Li, Talking Outside

In the past few days, Bitcoin has dropped directly from around $96,000 to around $86,000, with an overall decline of nearly 11%. As of the writing of this article, the daily RSI has also reached around 29, entering the oversold zone, indicating that people are still quite panicked. As shown in the figure below.

If we were to completely copy historical experiences and engage in a futile search for the sword, then so far, the investment success rate in this bull market seems relatively low. This is because during this period in the last bull market, Bitcoin had already begun to break through its cyclical high. As shown in the figure below.

In the data shown in the figure above, the horizontal axis represents the progress of the bull market (i.e., days), while the vertical axis shows the comparison of Bitcoin's return trend in this bull market cycle (i.e., the purple line) with the return trend at the beginning of the last bull market cycle (i.e., the light brown line).

Of course, during the process of breaking through historical highs in the last bull market cycle, there were also several significant corrections. If we directly compare the current Bitcoin correction, it seems that the current decline is still within an acceptable range.

1. Bitcoin's Bull Market, Altcoins' Bear Market

However, history cannot be repeated; at most, it can only be similar. This is because in different historical periods, the economic environment, policies, global situation, market scale, and other factors we face are all different. Especially since the beginning of this cycle, the crypto market is no longer an independent market; it has deeply intertwined with traditional financial markets, political and macroeconomic factors. Moreover, with more and more professional institutions participating, ordinary retail investors find it harder to grasp and predict market developments. When the crypto market begins to be controlled by institutions, policies, and macro liquidity, it seems that some old cycle experiences, strategies, and indicators are no longer applicable. Therefore, no one can make a 100% accurate prediction about the market's future trends.

However, based on my personal position, I will continue to maintain an optimistic outlook on the overall market trend moving forward. Moreover, Bitcoin has been consolidating around $100,000 for quite some time. Since it hasn't gone up, a relatively large correction may not be a bad thing. If no larger-scale black swan events occur in the future, I believe that after some consolidation and correction, if we can also see some new recovery driving factors in narrative, economy, or policy (which is the main point, but currently unknown), then it is not impossible for Bitcoin's price to reach new highs this year.

What I mentioned above mainly concerns Bitcoin, excluding altcoins, which seems to be one of the biggest issues facing this cycle. We have discussed the topic of altcoin season multiple times in previous articles on Talking Li, Talking Outside. As the current bull market progresses, altcoins are performing very poorly overall. Although some partners indicate that altcoins seem to have dropped as much as they can (many altcoins have declined over 80%), if Bitcoin still needs to undergo corrections, then theoretically, altcoins can only fare worse (here we refer to the overall situation, without excluding individual altcoins that may rise against the trend).

In short, from the overall situation of Bitcoin, we are still in the bull market phase (the later stage of this bull market, which is also the period of highest phase risk). But if we only look at the overall performance of altcoins, people's sentiment is basically no different from that of a bear market.

2. Not Desperate Enough, Not Crazy Enough

Currently, the opinions of various KOLs are basically polarized. Some declare that the bull market has not ended and that there may still be new opportunities this year, while others announce that they have already exited at high positions and that the market has entered a bear market. As a result, retail investors are even more confused. Pessimistic investors say that the bear market has begun, while optimistic investors claim that this is just a new correction. Anxious investors express that they don't know whom to listen to.

The current market gives me the overall feeling that it is still not desperate enough, nor crazy enough. Is this the calm before a new storm? Or will the market sink into oblivion with no return? Different people (in terms of positions and mindset) may have different views or understandings on this.

I remember in an article from September 4, 2024, we mentioned: the market is often a manifestation of emotions; the reasoning is that simple because human nature is like this. Market trends often arise in despair, explode in divergence, and end in madness. From the time dimension, over 80% of returns often occur in the last 20% of a cycle. Whether one can endure this 80% of the time depends on the individual, and whether one can manage their emotions and exit effectively in the last 20% of the time also depends on the individual. For me personally, I will definitely continue to wait patiently and will not sell my Bitcoin due to short-term panic. At worst, I can hold on for a few more years until the next bull market; this doesn't affect me much. A person's position management determines their mindset, and mindset determines whether they can last in this field. Learn to befriend time; don't flounder in the river of time. Often, those who drown in the end are those who can swim.

From the market's perspective, the possible path now is to continue necessary corrections, perhaps for several weeks or longer, allowing those pessimistic individuals to completely lose hope and those anxious individuals to become pessimistic. However, it should not lead to their complete collapse. At this time, a few strong bullish candles (or new narrative stories) will allow them to re-enter the market. In this process, only a small number of sufficiently patient individuals who can strictly manage their positions (including risk management plans) and adhere to their trading discipline can take money from others' pockets under such trends and cycles. Of course, if you are already a relatively professional trader, you can continue to hedge through derivatives when the market declines sharply.

As for when the bear market will arrive, I cannot predict the specific time, but my viewpoint has not changed, as mentioned above: I will continue to remain optimistic. However, while staying optimistic, one should also prepare their Plan B in advance. In fact, my personal Plan B was thought out the moment I decided to start dollar-cost averaging. This has been shared multiple times in previous articles on Talking Li, Talking Outside. For example, many people often leave comments saying they want to follow my purchases, but this may not be suitable for everyone. To say something that might not sound very friendly, first, I have no obligation to casually lead you or replace you in trading operations (because there are certain risks involved); at most, I can share what I have done through articles or individually in groups with some partners. Second, I can hold onto Bitcoin for several years without selling; can you? Third, my own trading has both gains and losses; I can only be responsible for my own profits and losses, not yours.

Including the recent discussions about the bear market, we have actually done some personal reflections in several articles last year (2024). I wonder how many people remember? For instance, in an article from July 22 last year, we mentioned: if you have just entered the crypto space and are still somewhat confused about blockchain and crypto, our advice is that during the remaining less than a year of this bull market (counting from July 2024), you should not mess around. If you want to participate in trading, simply make necessary investments in BTC/ETH. If you can become a professional trader, then you don't need to care about market fluctuations because whether the market rises or falls, you have opportunities to make money. As shown in the figure below.

This week, many people are also paying attention to Nvidia's earnings report (February 27, Beijing time) and the U.S. PCE inflation data (February 28). Market volatility will still be relatively high, but volatility often creates opportunities. Just continue to manage your positions based on your personal risk preferences. Or to put it more bluntly, as mentioned at the beginning of this article, Bitcoin's daily RSI has returned to around 29. In the short term, encountering such a situation, you actually won't lose out by buying. As for how to buy or how much to buy each time? Is it a short-term plan or a long-term plan? Should there be a take-profit/take-loss plan? … This still depends on your own mindset and position!

In conclusion, after experiencing phases of prosperity and bubbles, the market will eventually welcome new opportunities or even transformations. With over 98% of projects dying or going to zero, this market will usher in a new era. Also, remember that in our New Year's article on January 1 this year, we mentioned: 2025 signifies that the crypto space may welcome or begin to enter a new era, and each of us will become participants and witnesses.

Note: The original article was written with 5,000 words and was condensed to 2,700 words for publication. The complete original text has been backed up in the Notion of Talking Li, Talking Outside.