Market Outlook for February: Is the bull market still there after the cryptocurrency market crash?

The market has been falling since last weekend, and began to accelerate in the early hours of Monday. This morning, there was a huge amount of selling, and almost all the long leverages of more than 5 times of the copycats were liquidated.

I myself did not escape this wave of decline. Although I reduced some positions in the past few days, it was also my large spot positions that were hit. I can only say that compared with all the leverage liquidations, it is better, and I am still alive.

What everyone is concerned about is just one thing: Is the bull market over now?

The market is now full of panic, and both bearish and pessimistic views have their own reasons. Those who are optimistic about the future believe that the leverage has been fully utilized and the market can rise happily in the future. Those who are pessimistic believe that except for BTC, which is still in a bull market, other altcoins including Ethereum have already been in a bear market, and a large number of altcoins continue to hit new lows.

The trigger for today's plunge

First of all, we need to analyze the reasons for this wave of sharp decline in a simple and easy-to-understand way: the main reason for this wave of sharp decline is not in the currency circle itself but outside.

1. The issue of tariffs is difficult to explain in a short article, and I cannot guarantee that I understand the key points thoroughly. But the general idea is that the market expected Trump to wield the "tariff stick" when he came to power, mainly to use this attitude to force other countries to make concessions on some issues, that is, tariffs are just a weapon to scare people.

As a result, it was discovered over the weekend that Trump was ready to play for real, and even used IEEPA (a special power that the president can use in an economic emergency to initiate economic sanctions or modify tariffs without restrictions from Congress), which had a huge impact on the market. In addition, it was the weekend, and the U.S. stock market could not price this matter. The cryptocurrency circle had no reference to the U.S. stock market, and it was alone in causing panic.

2. Deepseek also has a great impact on US AI stocks, especially the leader Nvidia. Why can Nvidia surpass Apple? Because the market is optimistic about the big narrative of AI, and AI requires a lot of computing power, and Nvidia's chips are in short supply. Deepseek's ultra-low cost (I don't know whether it is true or not) makes investors begin to doubt whether so much computing power (chips) is really needed. Is it necessary for other technology companies to invest huge amounts of money in the development of AI?

The US stock market has long been riddled with holes, with most companies' stock prices sluggish (similar to altcoins), and the number of corporate bankruptcies has hit a new high since 2008. The stock index is supported by the stock prices of technology giants. If a few giants fall, how can the US stock market not fall? As long as the Deepseek incident is not falsified, it will be a sword hanging over the US stock market.

3. Regarding the interest rate cut, the Federal Reserve announced a few days ago that it would not cut interest rates. Many people began to be pessimistic and believed that it would not be cut once in 25 years or even at all, which also had a certain impact on market expectations. I think this matter has an impact but not a big one. The previous article in December had already judged that there is a high probability that there will be no interest rate cut this time, and we will wait and see. In addition, the new FOMC voting committee is relatively dovish, and Trump will also put pressure on Powell to cut interest rates. Japan's previous announcement of an interest rate hike also had an impact, but it was secondary to this decline.

In general, this decline was caused by the combined effect of multiple factors, especially the impact of sudden events such as tariffs and deepseek.

Let's look at the specific market performance. This wave of BTC's rise has set a new high. The correction from the new high on January 20 to today is only 16 points. The plunge from Sunday to Monday is actually only 11 points. This correction range is a very normal "bull market flash crash" no matter how you look at it.

The bull market of copycats may have ended

The key is that the altcoins including Ethereum have been hit too hard. Ethereum has fallen from the recent high of 3400 on the 1st to 2100, a 38% drop in 2 days. SOL has also fallen back 40% from its recent record high. This is still a relatively large currency. Many altcoins listed on BN have continued to hit new lows, and have even fallen below the lows before the launch in the second half of last year. Yesterday, there were many altcoins that fell by 60%.

Last night, I placed an order in advance based on the drop of BTC which was about 5 or 6 points, which was twice the drop of BTC. In the end, I still suffered a 20% drop after I bought it.

If I believed that after BTC stabilized at 100,000, the altcoins would catch up and start the altcoin season (some tracks and projects rose sharply, while other projects generally rose slightly, rather than the overall rise like the bull market in 2021), then now looking at the market again, I think the bull market of altcoins has ended, or it ended as early as the beginning of 2024, but we were confused by the rise of BTC last year.

I think the main reason for this phenomenon is that we usually think that the entry of Wall Street institutions will push BTC to the sky, and then the overflow funds and newly entered retail funds will buy cheaper altcoins, forming the rising order of the previous bull market. But in fact, because the number of altcoin projects has increased significantly in this round of bull market, most of them are "VC coins" with high FDV and low circulation, the market liquidity has been drained, and these projects have a very poor wealth-creating effect in the secondary market.

For copycats, listing on platforms like BN has become a channel for project owners and VCs to exit. Project owners sell when they go online, institutions sell when they unlock, and users sell when they receive airdrops. Retail investors in the secondary market have been buying directly, but found that the depths are unfathomable, and they have become the payers of the feast. When the market began to punish those diamond hands who held coins, and when retail investors also began to stop accepting these coins and began to turn to relatively fairer memes, the market began to self-FUD as a whole.

The current market perception is that you should not have any faith in altcoins, and you should either sell them or sell them for BTC if you are afraid of missing out. This has caused the exchange rates of almost all currencies against BTC to continue to fall. Even if some currencies are strong in the short term, they will continue to fall in the long run.

There is only one way to reverse the situation of the market's continuous self-FUD on altcoins, which is a large-scale, large-scale, and sustained general rise in altcoins, so that the altcoins' wealth-making effect will reappear , rather than directly sucking the blood of the whole market like Trump did. I think this is impossible in the current market environment, unless the Federal Reserve releases a huge amount of money like in 2020, and the money is so much that it overflows.

However, given the current macroeconomic environment, it is unlikely that such large-scale monetary easing will occur again, especially as the current global economy is much worse than expected, otherwise so many conflicts and civil unrest would not have broken out.

What I have said may not be correct, but this is my personal understanding of the current plight of copycats, and the reason why I think the plight of copycats will be difficult to reverse for a long time to come.

Future operation suggestions and short-term judgment

My view on the future operations of copycats is: no longer make long-term layout at this stage , only participate in short-term operations, and no longer hold for the long term; participate in projects with high market attention, and give up unpopular projects; copycat spot should also stop loss and exit, and give up the fantasy of getting back the capital of the trapped positions.

As for BTC, I think that if there is no serious economic or financial crisis in the United States, the next step may be a long and slow bull market. There may be periodic adjustments in the middle, and the magnitude will be larger than that of the US stock market, but it will not fall by 70-80% like before.

As the article says, I paid for my own mistakes this time, and the market is always right. In the future, we must insist on cashing in the profits of the cottage industry in a timely manner, allocating part of it into BTC and part of it into cash, and not worry about short-term cottage industry selling and missing out.

Finally, let's talk about the short-term. Subjectively, I think today's decline is almost enough. According to historical experience, after such a sharp plunge, it is usually the short-term bottom. The next step should be a disorderly oscillation and then choose a direction. After the oscillation, it will slowly fall down for two or even three times to confirm the bottom. Those who did not buy the bottom in the morning don't need to worry, there will be opportunities.

For example, whether the bottom has been reached this time, because the landmines that led to this decline have not been completely eliminated, we have to look at the trend of the US stock market in the next few days. If the risks of tariffs and US stocks are lifted, then it may fluctuate and then rise. If the problem intensifies, it may continue to plummet like the 313 crash after the 312 crash, which is not impossible.

Don't speculate on the bottom, especially the decline caused by the emotional release of the event, and what kind of tricks will the unconventional president like Trump do? This is not something that can be predicted by indicator technology or market analysis. Follow the market and don't be obsessed with your own predictions. We are here to make money, not to prove that our guesses are right.

In the chaotic period after the current crash, a black swan may come. All we can do is to do a good job of risk control, reduce our positions and keep some bullets, stay away from high leverage, and even if we must use leverage, we must set a stop loss.

As long as you are alive in the market, you still have a chance; if your position is liquidated, you will really lose everything.