Market Outlook for February: Cryptocurrency Market Plunge, Is the Bull Market Still There?

Author: Xiao Lizi; Source: Blockchain Blue Ocean

The market has been falling since last weekend, and it started to accelerate in the early morning of Monday. This morning, there was a huge drop, and the leverage of more than 5 times the copycat long positions was almost all liquidated.

I myself did not escape this wave of decline. Although I reduced some positions in the past few days, it was also a large spot position that was hit. I can only say that it is better than various leverage explosions. I am still alive.

Everyone is concerned about one thing, is the bull market over now?

Now the market is full of panic, and there are reasons for both shorting and bearishness. Those who are optimistic about the future market believe that the leverage has been completely blown up and the car is light, and it 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 long been in a bear market, and a large number of altcoins have continuously hit new lows.

The fuse of today's plunge

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

1. The issue of tariffs. This issue is difficult to explain clearly in a short space, and I cannot guarantee that I understand the joints very thoroughly. But roughly speaking, the market expected that Trump would wield the "tariff stick" when he came to power, mainly using this attitude to force other countries to give in 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 emergency economic state to initiate economic sanctions or modify tariffs without restrictions from Congress), which had a huge impact on the market. Plus it was the weekend, the U.S. stock market could not price this matter, and the cryptocurrency circle had no reference to the U.S. stock market, so it panicked alone.

2. Deepseek also had a huge impact on U.S. stock AI, 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. And Deepseek's ultra-low cost (I don't know if it's true or not) made investors begin to doubt whether so much computing power (chips) is needed, and whether it is necessary for other technology companies to invest huge amounts of money in the field of AI?

The US stock market has long been riddled with holes, most companies' stock prices are 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 has not been falsified, it is a sword hanging over the US stock market.

3. Regarding the issue of interest rate cuts, 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 much. The previous article in December has already judged that there is a high probability that there will be no interest rate cut this time, and it will wait and see. Moreover, the newly replaced FOMC voting committee is relatively dovish, and the King of Understanding will also put pressure on Powell to cut interest rates. Japan's previous announcement of an interest rate hike also had an impact, but this was secondary to the decline.

In general, this decline was caused by the superposition of multiple factors, especially the sudden impact of tariffs and deepseek.

Looking at the specific market performance, BTC's rise has set a new high. From the new high on January 20 to today's correction, it 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 altcoins may have ended

The key is that altcoins, including Ethereum, have been hit hard. Ethereum has fallen from its recent high of around 3400 on the 1st to 2100, a 38% drop in 2 days. SOL has also adjusted 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 60%.

I placed an order for altcoins in advance last night according to BTC, which was about five or six points, and the altcoin fell twice as much as BTC. As a result, I bought it and suffered a 20% drop.

If I believed before that after BTC stabilized at 100,000, the altcoins would catch up and start the altcoin season (some tracks and some projects rose sharply, and other projects generally rose slightly, rather than the overall rise like the bull market in 2021). 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 Wall Street institutions will enter the market and pull BTC to the sky, and then the overflow funds and the newly entered retail funds will buy cheaper altcoins, forming the rising order of the previous bull market. But in fact, because the number of Shanzhai 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 Shanzhai, listing on platforms like BN has become a channel for project parties and VCs to exit. Project parties 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 direct, but found that the depth is bottomless and became 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 Shanzhai, either sell it, or sell it 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.

To reverse this situation of the market's continuous self-FUD of the cottage, there is only one possibility, that is, a large-scale, large-scale, and sustained general rise in the cottage, and the reappearance of the cottage's wealth-making effect, rather than pulling up like TRUMP and directly sucking the blood of the whole market. I think the current market environment is impossible to achieve, unless the Federal Reserve releases a huge amount of money like in 20 years, and the water is so much that it overflows.

But in the current macro environment, it is difficult to see such a large-scale release of money again, especially since the current global economy is really much worse than expected, otherwise there would not be so many conflicts and civil unrest.

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

Future operation suggestions and short-term judgment

My view on the future operation of Shanzhai is: At this stageNo longer make long-term layout, only participate in the band, no longer hold for a long time; participate in projects with high market attention, and give up unpopular projects; Shanzhai spot should also stop loss and leave, and give up the fantasy of getting back the trapped position for a long time.

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

It is said in the article that I also paid for my own mistakes in this wave, and the market is always right. In the future, we must insist on realizing the profits of the cottage in time, part of which is allocated to BTC and part of it is allocated to cash, and we should not worry about the short-term cottage selling and missing out.

Finally, let’s talk about the short-term. I subjectively think that the decline today is almost the same. According to historical experience, after such a sharp plunge, it is usually a short-term bottom. The next step should be to make a disordered 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 do not need to worry, there will be opportunities.

For example, whether the bottom has been built this time, because the mines that caused this decline have not been cleared, it depends on 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 upward. If the problem intensifies, it may continue to plummet like 313 after the 312 plunge, which is not impossible.

Don't guess the bottom, especially the decline caused by the emotional catharsis of the event, and what kind of moths will the president who does not play by the rules like Trump do? This is not something that can be predicted by indicator technology or market analysis. Follow the market, 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 plunge, the black swan may come. All we can do is to do a good job of risk control, reduce positions and keep some bullets, stay away from high leverage, and even if we must use leverage, we must set a stop loss.

If you are alive in the market, you still have a chance, but if you blow up your position, you will really have nothing