Written by: Luke, Mars Finance
For crypto investors who experienced the spectacular bull market of 2020-2021, the current market is undoubtedly confusing and painful. That was an era ignited by global central banks' massive liquidity injection, where everything seemed to rise, and investors could seemingly make incredible returns by blindly buying any project. However, those days are long gone. Now, the global financial market hangs in a delicate balance: on one side are surprisingly strong US economic data, and on the other, the Federal Reserve's unwavering hawkish stance, with a historic high-interest-rate environment weighing heavily on all risk assets.
This paradigm shift driven by the macro environment has made the current crypto cycle the "most challenging era" for retail investors. The previous "liquidity-driven" model of pure emotional speculation has failed, replaced by a "value bull" market that focuses more on intrinsic value, driven by clear narratives and fundamentals.
However, on the other side of difficulty lies opportunity. When the tide recedes, true value investors will usher in their "golden age". It is precisely in such an environment that institutional compliant entry, technological programmatic deflation, and real-world applications integrated with the real economy can highlight their true, cycle-transcending value. This article aims to deconstruct this profound transformation and explain why this era that feels challenging for speculators is actually a golden path for prepared investors.
I. The Most Difficult Era: When the "Liquidity Flood" Recedes
The difficulty of this cycle stems from the fundamental reversal of macro monetary policy. Compared to the extremely friendly environment of the previous bull market with "zero interest rates + unlimited quantitative easing", the current market faces the most severe macro headwinds in decades. The Federal Reserve's unprecedented tightening cycle to curb the worst inflation in forty years has doubly suppressed the crypto market, completely ending the era of easy profits.
1. Macro Data Puzzle: Why Rate Cuts Seem Distant
The key to understanding the current market's challenges lies in why the Federal Reserve is reluctant to ease at the end of its rate hikes. The answer is hidden in recent macroeconomic data - these seemingly "good" data have become "bad news" for investors hoping for easing.
Stubborn Inflation and Hawkish Dot Plot: Although inflation has fallen from its peak, its stickiness far exceeds expectations. The latest data shows that while the US May CPI year-on-year rate was slightly below expectations, the core inflation rate remains stubbornly high at 2.8%.
This is still significantly far from the Federal Reserve's 2% target. This stickiness is directly reflected in the Fed's latest economic projections (SEP) and the closely watched "dot plot". After the June meeting, Fed officials significantly lowered their rate cut expectations, reducing the median number of rate cuts this year from three to just one. This hawkish shift has heavily dampened market optimism. As Powell said in the post-meeting press conference: "We need to see more good data to increase our confidence that inflation is continuously moving towards 2%." In other words, the Fed's threshold for rate cuts has become very high.
Strong Labor Market: Meanwhile, the US labor market continues to show remarkable resilience. The May non-farm employment report showed 139,000 new jobs, better than market expectations, with the unemployment rate remaining low at 4.2%. A strong job market means consumer spending is supported, which in turn puts upward pressure on inflation, making the Fed more hesitant about rate cuts.
Powell's "Historical Script": As Nicholas Colas, co-founder of DataTrek Research, pointed out, current Chairman Powell is following his predecessors' playbook, adopting a hawkish tone in the final stage of his term to solidify his historical legacy of successfully curbing inflation. This consideration of personal and institutional reputation means that unless economic data shows a cliff-like decline, policy shifts will be extremely cautious and slow.
2. The "Gravity" of High Interest Rates: The "Bleeding" Effect on Crypto Assets
This macro background directly leads to the crypto market's difficult situation:
Liquidity Drought: High interest rates mean less "hot money" in the market. For the crypto market, especially Altcoins, which heavily rely on new funds to drive price increases, the tightening of liquidity is its most fatal blow. The previous "everything rises" scenario has been replaced by a structural market with "sector rotation" or even "only a few hot spots".
Increased Opportunity Cost: When investors can easily obtain over 5% risk-free returns from US Treasury bonds, the opportunity cost of holding assets like Bitcoin, which don't generate cash flow and have extreme price volatility, increases dramatically. This causes large amounts of funds seeking stable returns to flow out of the crypto market, further exacerbating the "bleeding" effect.
For retail investors accustomed to chasing hot spots in an environment of abundant liquidity, this change is brutal. Strategies lacking deep research and simply following trends are likely to be severely impacted, which is the core of this cycle's "difficulty".
II. The Golden Era: From Speculation to Value, Emerging New Opportunities
However, the other side of crisis is opportunity. The macro headwinds act like a stress test, squeezing out market bubbles and screening out core assets and narratives with long-term value, thus opening an unprecedented golden age for prepared investors. The resilience of this cycle is driven by several powerful internal dynamics independent of macro monetary policy.
1. The Golden Bridge: Spot ETF Opens the Institutional Year
In early 2024, the US Securities and Exchange Commission (SEC) historically approved the listing of spot Bitcoin ETFs. This is not just a product launch, but a revolution in the crypto world. It opens a "golden gate" for trillions of dollars in traditional financial funds to invest in Bitcoin compliantly and conveniently.
Continuous Inflow: By the second quarter of 2025, just BlackRock's IBIT and Fidelity's FBTC have already managed total assets of over tens of billions of dollars, with continuous daily net inflows providing strong purchasing power for the market. This "new liquidity" from Wall Street largely offsets the liquidity tightening caused by high interest rates.
Anchor of Confidence: BlackRock CEO Larry Fink called the Bitcoin ETF's success a "revolution in capital markets" and stated it's just the "first step in asset tokenization". This endorsement from the world's largest asset management company greatly boosted market confidence and provided a clear signal for retail investors to follow institutional steps and make long-term value investments.
2. Code's Faith: Hard-Core Support Under the Halving Narrative
In April 2024, Bitcoin's fourth "halving" will reduce its daily new supply from 900 to 450 coins. This code-defined, predictable supply contraction is Bitcoin's unique charm that distinguishes it from all traditional financial assets. With demand remaining stable or even growing (especially from ETFs), the halving provides a solid, mathematical underlying support for Bitcoin's price. Historical data shows that Bitcoin has reached all-time highs within 12-18 months after each of the previous three halvings. For value investors, this is not a short-term gimmick, but a reliable, cycle-transcending long-term logic.
3. Narrative Revolution: When Web3 Begins to Solve Real Problems
Macroeconomic headwinds have forced market participants to shift from pure speculation to exploring projects' intrinsic value. The core focus of this cycle is no longer baseless "meme coins", but innovative narratives attempting to solve real-world problems:
AI + Crypto: Combining AI's computational power with blockchain's incentive mechanisms and data ownership to create new decentralized intelligent applications.
Real World Assets (RWA) Tokenization: Putting real-world assets like real estate, bonds, and artworks on-chain, releasing their liquidity and breaking down barriers between traditional and digital finance.
Decentralized Physical Infrastructure Networks (DePIN): Using token incentives to enable global users to collectively build and operate physical infrastructure networks, such as 5G base stations and sensor networks.
The rise of these narratives marks a fundamental transformation from "selling air" to "investing in value". Crypto venture capital giant a16z crypto emphasized in its annual report the potential of "AI+Crypto" as the core innovation engine for the next cycle. For retail investors, this means greatly increased opportunities to discover value through in-depth research, where knowledge and understanding, for the first time, become more important than mere courage and luck.
III. New Cycle Survival Rules: Patiently Positioning Between the Finale and Prelude
We are at a crossroads of an era. The Federal Reserve's "hawkish finale" is unfolding, while the prelude to easing has yet to begin. For retail investors, understanding and adapting to new rules is key to navigating the cycle and seizing golden opportunities.
From Chasing Trends to Value Investing: Abandon the fantasy of finding the "next 100x coin" and shift towards researching project fundamentals, understanding its technology, team, economic model, and track landscape.
From Short-Term Trading to Long-Term Holding: In a "value bull" market, true returns belong to investors who can identify core assets and hold through volatility, not frequent traders.
Build a Differentiated Investment Portfolio: In the new cycle, different assets' roles will become clearer. ** Bitcoin (BTC) ** as institutionally recognized "digital gold" is the portfolio's ballast; Ethereum (ETH), with its robust ecosystem and ETF expectations, is a core asset with both value storage and productive properties; while high-growth Altcoins should be "rocket boosters" with small positions based on deep research, focusing on frontier tracks like AI and DePIN with real potential.
2. Maintain Patience and Prepare in Advance
DataTrek's research reveals an interesting phenomenon: In the last 12 months of the past three Federal Reserve chairs' terms, even with rates maintained at high levels, the S&P 500 averaged a 16% increase. This indicates that once the market is convinced the tightening cycle has ended, risk appetite may warm up even before rate cuts occur.
Such a "front-running" trend may also emerge in the crypto market. While the market generally focuses on short-term speculation about "when rates will be cut", true sages have already begun considering which assets and tracks will occupy the most advantageous positions in the future feast driven by macroeconomic tailwinds and industry cycles.
Conclusion
This crypto cycle is undoubtedly an ultimate test of retail investors' cognition and mindset. The era of easily profiting through courage and luck has passed, and a "value bull" era requiring deep research, independent thinking, and long-term patience has arrived. This is precisely its "difficulty".
However, it is in this era that institutional funds are flowing in at unprecedented scales, providing a solid market bottom; core asset value logic is becoming increasingly clear; and truly value-creating applications are taking root. For retail investors willing to learn, embrace change, and view investment as a cognitive realization journey, this is undoubtedly a "golden age" where they can compete alongside top minds and share the industry's long-term growth dividends. History does not simply repeat, but is always surprisingly similar. Between the finale and prelude, patience and foresight will be the only path to success.
