Good Drop Bad Drop Dilemma

By idiosyncratic | Idiosyncratic Crypto | 24 Apr 2024

The crypto market has crashed hard since the beginning of April. Some of the primary reasons were the increasing global tension with the fear of another global war and the loss of hope for an interest rate cut before the third quarter of 2024.

The market was pretty optimistic about the interest rate cuts by the FED and the other major central banks. Yet, the FED does not like the data coming from the Core CPI, jobless claims, and other data. As the fiat money that yields higher real yield (which means that the APR is above the inflation of the currency) gains more value, Powel and other members of the FED are not eager to start decreasing the rates soon.

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As the GBTC sell - off keeps coming, the interest rates stay high and the fear of war surrounds the market, cryptocurrencies are having terrible times in the short term. After getting rejected from $73K, Bitcoin could not stay in the upper bands and dropped to $60 in a short time. Similar to Bitcoin, altcoins lost some important price levels due to the growing uncertainties and further risks.

Bad Drop Happens in Bull Tops

If you are investor who prefers spot positions, then most of the drops and spikes do not change a lot of things in your portfolio. As long as the main trend is not violated, your hodling or DCA strategies are not likely to change fundamentally.

The real change happens when the trend starts to alter. For example, the price of Bitcoin was going up only during 2021 until October 9 when the first big red candle initiated another trend in the chart.

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After that candle, there was no way to make gains from the spot positions as the price was forming lower lows every week. This is what we can see as a bad drop since the revival of the market was not a thing.

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Federal Funds Effective Rate

The interest rates were at the lowest level but the market knew that sentiment was changing. After a short while, the interest rates started to go up and reached up to 5.25 - 5.50 as we are in today.

Good Drop: Positive Sentiment + Negative Price

If you missed the spike in RNDR, SOL or memecoins, you might be feeling left out. However, the drops in the markets like we experience today are some exceptional times when you can buy the most promising coins at discount!

I wanted to have some more RUNE, INJ, SEI, PYTH, JUP and SOL as I missed their great march. Besides, I need to grow my RWA and AI bags as they are still the hottest narratives. Without such times of " good drops ", no new buyers can be a stakeholder and the whales do not enjoy watching the party from outside 😉

Good drops are the times when the new buyers become a stakeholder of a coin during the next bull market. The more new diamond hands enter, the harder the coin can pump. Yet, with the weak hands as stakeholders, the coins' performance would be rather limited.

At the interest rates of 5.25 - 5.50, all coins seem cheap to me in addition to Gold, Silver, and other commodities. As the sentiment is on our side, we can enjoy the shopping opportunity at discounts 🦍 There is no escape from interest rate cuts as the banks in the U.S. started to sign some negative data. If a wave of bankruptcies hits, then the whole world suffers from it! Thus, enjoy the drop and invest wisely in these great times.

What do you think about the different types of market drops?

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