What Is The Core Of Changing The Trend Of This Bull Market?


On April 18, the entire market suddenly plummeted, and almost all mainstream cryptocurrencies plummeted by 10% to 20%.

The market has done a lot of analysis on this sudden plunge, mainly including the following interpretations:

  • The U.S. Treasury Department will accuse several financial institutions of using cryptocurrency to launder money;
  • Some countries (Turkey, India) have extremely negative attitudes towards cryptocurrencies;
  • Rumors about coinbase executives selling stocks;
  • and many more. . .

If these factors are really the culprit of this plunge, in my opinion, there is nothing terrifying about this plunge, and the plunge will not affect the current bull market trend in the slightest. Because the outbreak of short-term events is just an accident, it is not the fundamental force to change the trend of the bull market.

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So what is the fundamental force to change the trend of the bull market?

I think there are basically two types: one is that the capital has begun to shrink; the other is that the market itself has already contained a huge bubble, and the market has been extremely irrational.

The first force is the Fed's interest rate hike. Obviously, this has not happened yet, so we can rule out this factor. In the second situation, I think it is still far away, and the market is still far from the madness of imagination.

In the last bull market, there were at least 5 pullbacks of more than 20%, and there were more pullbacks of less than 20%. Therefore, just looking at empirical data, the number of callbacks like the current one is not too many but too few in this bull market, so the market trend is still healthy.

Moreover, the correction in the bull market is not only harmless, but beneficial. It is more conducive to the continued rise of the market outlook and more conducive to the accumulation of upward momentum.

So there is nothing wrong with a big drop like this one. We will treat it as if the market stopped to rest and rest as the market rushed all the way, so that we could wipe off our sweat.

When we talk about market trends, many media or analytical articles always like to say that a certain plunge or surge is caused by a group, an institution, or a joint operation of several institutions, so whenever there is a surge or plunge in the market, The media always like to find the "black hands" behind this.

I don't agree with this kind of view. I believe that the market does have individual forces that are relatively strong, but I think it is difficult for the current market to have individual forces that can influence the market's trend. The short-term market trend is often irregular Brownian motion.

Therefore, when we encounter such major adjustments in the market, we only need to see whether these possible adjustment factors will fundamentally change the trend. If not, we will continue to maintain the existing strategy.

In addition, I mentioned two forces that may fundamentally change market trends, but for these two forces to truly produce effects in the market, it also requires a process from quantitative change to qualitative change.

And this process, we can perceive it from clear event reports (such as the Fed’s interest rate hike) or personal experience, and even if the force has already appeared, its effect will not appear immediately, so even if this type of force has an effect. Or when it is about to have an effect, we can control it.

For ordinary investors, in the face of such a sharp drop, the most important thing is to calm yourself, not to lose your bargaining chip because of panic, let alone at this time, speculate on the next trend of the market, increase leverage, and do Long or Short.


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Willson-Deng
Willson-Deng

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