Recently, Huobi HTX's themed column "Dialogue with HTX Friends" invited independent researcher NingNing, Huobi Research Institute analyst Alchemist, and crypto KOL Fulou Shou OTC to discuss the topic "Correction or Bear Market? Where is the crypto market heading next?". They explored the short-term trend of the crypto market, the reasons for the market's decline after the launch of the spot ETH ETF, as well as investment opportunities in AI, RWA, and the Solana ecosystem.
Macro Perspective: Cold Bull Market and Liquidity Dilemma
NingNing: From a macro perspective, the four-year cycle of Bitcoin has been broken in this round, mainly because the Fed's rate cut cycle and Bitcoin's monetary cycle are no longer in sync. Bitcoin was born during the subprime crisis, when the Fed significantly cut interest rates, and Satoshi Nakamoto might have set the parameters based on this to fight against fiat inflation. However, the current background has changed to the financial game between China and the US and the long-term bull market driven by AI in the US, and the Fed maintains high interest rates to compete, resulting in no interest rate cuts during Bitcoin's halving last year, presenting a "cold bull market" - Bitcoin rises alone, while Altcoins generally collapse, and Meme coins also experience a sharp increase due to lack of off-exchange liquidity.
The current market consensus is that the macroeconomic market has turned into a game between Trump and the Fed, with the former wanting to cut interest rates to reduce debt, and the latter tending towards high welfare, and the conflict between the two has brought uncertainty, leading to a correction in the crypto market. But the outlook is not pessimistic, as the US fundamentals are solid and AI is leading, with only policy uncertainty remaining; Chinese assets such as Hong Kong stocks have reached a stage-high, and it is expected that assets will flow back and rebound strongly in the next quarter.
Alchemist: This bull market has not seen a clear "crazy bull" phase. Observing the indicators, even at the peak, they did not reach the heights of the previous cycle. The core reason is that the previous bull markets were driven by the Fed's interest rate cuts, low interest rates, and liquidity injection, while in this bull market, the US-China Fed has continued to shrink its balance sheet.
Furthermore, there are still "unexploded bombs" before April: the impact of Musk's policies on government spending and layoffs has not yet materialized; the implementation of tariffs from April 2 may push up prices and suppress consumption, and the data has not yet reflected this. Therefore, it is difficult to determine whether this is a stage-bottom, and we need to wait for the March data to become clear. What is worth looking forward to is when the Fed will replenish its reserves, and if it uses this as a reason to end the balance sheet reduction, it will provide ample liquidity, which is a potential positive for the future.
Fulou Shou OTC: In the previous bull market, Bitcoin's double top benefited from factors such as the low total market capitalization of cryptocurrencies, the Fed's massive liquidity injection, and Grayscale's buying, which led to a crazy market. Although Bitcoin's performance is good this round, breaking through the previous high, it mainly relies on the launch of spot ETFs and the continuous 90% of capital inflow into the spot market to support it. The current Ethereum price is reasonable, as there is no new narrative in this round. It is estimated that Bitcoin's market capitalization can reach $3 trillion, but due to the Fed's lack of monetary easing, it is difficult for Altcoins to experience a crazy season. Future market performance will depend on the timing of the Fed's easing.
Investment Prospects of BTC and ETH
Alchemist: Hold BTC for the long term, with most stored in hardware wallets; sold most of ETH at $3,700 and added Solana on dips.
Fulou Shou OTC: Currently short on Bitcoin, but firmly believe it will eventually reach $1 million. In the short term, I am not optimistic about Ethereum, unless there is a major change in narrative or monetary easing. However, compared to Solana and BNB, Ethereum's core advantages lie in its mature technical framework, decentralized governance, compliance status, and ecosystem, making it suitable for long-term investment and asset allocation.
NingNing: Although Ethereum has undergone two upgrades, they have mainly focused on the consensus layer, and it may have strategically abandoned the Memecoin track - the resource investment in Memecoin infrastructure is far less than Solana. This also raises a question: what will support the consumption of block space after losing Memecoin? Only by consuming block space can on-chain revenue be increased and more Gas fees be burned, achieving deflation, which is a point of concern for Ethereum holders. However, the explosion of on-chain assets comes from supply-side innovation, not growth in user demand, so whether Ethereum will launch new products such as autonomous AI, DEX trading paradigm super-evolution, or RWA this year and next will be key to its renewed growth.
Investment Strategies in the Current Market
Fulou Shou OTC: As a cyclical trader, I currently think it's better to be in cash. Entering the crypto world is both fortunate and unfortunate, and I suggest everyone learn more, pay more attention, and stay on the right path to seize new opportunities.
NingNing: As a staunch believer, I think you can choose blue-chip coins, Altcoins, Alpha coins, or Meme coins based on the space paradigm; you can also adjust your strategy based on the time paradigm, for example, if you think the current cycle is poor and are optimistic about the long-term, you can convert 80% of your funds into stablecoins and wait for the super bull market at the end of 2025. The market is unpredictable, and being completely in cash may miss out on major opportunities.
Alchemist: Investment should be based on individual circumstances and strategies. Each person's cost and position are different, and the key is to manage your investment strategy and risk well.
