The bull market is not over, but it will take a long time to bottom out

Over the past week, the cryptocurrency market has experienced the largest adjustment since Trump's election victory. Although Bitcoin's decline was only 12%, many Altcoins have been halved, and the gains of some Altcoins in this round have been completely wiped out. If the reason for the lack of pessimism on December 10 was that the bull market was still warm, the recent decline has undoubtedly completely destroyed the confidence of the bulls. This has also made more and more investors firmly believe that the bull market is over. The author has always emphasized that the general rise is difficult to last. The growth in market capitalization driven by emotions will eventually be reversed by the ebb of emotions. Therefore, the more violent the rise of Altcoins, the more tragic the decline. After all, the market cannot always maintain a trading volume of $540 billion per day, which means that volatility and differentiation are inevitable. However, the author believes that the current volatility is more like a gear change in the bull market, rather than the end of the bull market, mainly for three reasons: 1. As of December 22, long-term Bitcoin investors have sold 1 million bitcoins since September, exceeding the 934,000 bitcoins sold in the 3-6 months. However, the last time the sale reached this scale, Bitcoin had a maximum drawdown of 33% in the range, while Bitcoin has only fallen 15% from its high point. This shows that the market's absorption capacity in this cycle is stronger, and Bitcoin's resilience has also improved significantly. 2. Historically, Bitcoin often experiences symbolic corrections before and after the introduction of major positive policy. For example, after the approval of the Bitcoin ETF, Bitcoin fell from $48,950 to $38,550, a drop of 21%. The current market decline before Trump's inauguration also fully conforms to this convention. Although the scale of the Bitcoin ETF has surpassed that of gold, the allocation of pension funds, listed companies and traditional financial institutions to the Bitcoin ETF is still far lower than that of the gold ETF. Therefore, this decline is most likely an opportunity for institutions to increase their Bitcoin positions. 3. MSTR currently has $7.65 billion in unused ATM issuance capacity and $15 billion in unused convertible note capacity, with a potential additional capacity of $22.65 billion, still capable of launching a counterattack. However, whether in terms of time or space, the market adjustment is far from over. If Bitcoin continues to test the lower limit of the range at $88,000, most Altcoins may find it difficult to defend the lows of December 20. Even if Bitcoin completes the bottom-finding around $88,000, the establishment of a new trend still needs to go through a long process of bottom-finding. In short, in this round of decline, investors do not need to rush to buy the dips, and the market still needs more time to digest the negative factors. At present, macroeconomic risks are still the biggest uncertainty factor in the market. Affected by the rebound in inflation and the imposition of tariffs, the market has generally lowered its expectations for the Fed's rate cuts next year, and some Wall Street institutions have even predicted that the Fed will start raising interest rates in the second half of next year. Therefore, the yield on the US 10-year Treasury bond has continued to rise against the backdrop of the Fed's rate cuts, exceeding the federal funds rate for the first time in nearly two years. This has formed a significant crowding-out effect on the liquidity of risky assets. At the same time, with the surge in US bond yields, non-US currencies are facing huge devaluation pressure, and the pressure of capital outflows is increasing. This has also driven up expectations of interest rate hikes in Japan. Although the Bank of Japan denies the possibility of a rate hike in the near future, Nomura expects the Bank of Japan to raise the benchmark interest rate in March 2025, and then raise the benchmark interest rate to 1% through two rate hikes. The risk of the yen carry trade reversal has once again become a focus of market attention. However, the outbreak of macroeconomic risks is not a bad thing. According to the prediction of White House crypto chief David Sacks, the crisis of the fiat currency system is the opportunity for Bitcoin to become the mainstream currency. In terms of operation, with the approach of Christmas, the market trading volume is gradually becoming thin. Periodic low volume and low price may appear before and after Christmas. For investors who are ready to buy the dips, the leading coins in the sub-sectors are still a good choice. After all, the declines of coins such as SUI, AAVE, and LINK in this round of adjustment are still far lower than the average level of Altcoins, and the "strong get stronger" feature is significant.