The crypto market is on the brink of a downturn—what opportunities should one look for?
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The crypto market is on the brink of a downturn—what opportunities should one look for?
Bad news didn't push us down, and good news didn't drive the price up.
Navigating Web3 tides with focused insightsWritten by: DEGEN SENSEI
Translated by: TechFlow
In Roman Catholic theology, Limbo is a border region between heaven and hell where souls reside that are not condemned to punishment but also do not enjoy the bliss of being with God in heaven.
In this market, many find themselves trapped in endless volatility—Bitcoin swings back and forth, killing most market participants.
Half fear structural collapse, dragging us into hell. The other half hope this is a bull market, lifting us upward.
Meanwhile, the market does what it does best—punishes both sides to maximize liquidatable value.
Where Do We Go From Here?
First, I’m no oracle—this is just how things feel after years of observation. Bulls like to believe the greatest pain comes from relentless upside, but that’s not true. The deepest pain comes from a sharp drop that destroys the final hopes of the last batch of longs before reversal.
Since everyone believes they can simply allocate funds around the halving, the painful scenario is rapid up-and-down swings—trapping halving speculators on the sidelines, then forcing them to enter at higher prices.
Now we find ourselves in a situation where bad news doesn’t push us down, and good news doesn’t push us up. DeFi appears to have weathered its worst storm—the industry’s bear market has likely ended, and all major negatives have been priced in.
My view is we’re in a situation similar to 2019, when you could find deeply undervalued DeFi gems that later rose 10-100x. Today, people are selling long-term positions over 10% dips—moves that will be irrelevant in 1-2 years.
The SEC lawsuit against Coinbase and DOJ fraud charges against Binance represent worst-case scenarios. These are the two largest exchanges, and the market is still waiting for resolution. If these unfold, price drops will follow—and people will claim the industry is dead. That’s your signal to enter. It will unlock the market’s potential.
Your task is survival—avoid liquidation. In this choppy environment, increasing your portfolio value by 10–20% is insignificant in the grand scheme. We’re likely to see much higher price levels in the coming years, and long-term holders will clearly outperform short-term traders.
Bitcoin Halving and ETFs
Many Ethereum maximalists want to believe the Bitcoin halving is just a meme. People can believe whatever they like—but the reality is, due to selling pressure dynamics, it significantly impacts market structure. Right now, Bitcoin miners are selling BTC at record levels based on their income.
When this selling pressure drops by 50%, it will inevitably affect Bitcoin’s market structure. Reduced selling pressure typically precedes new bull markets.
Upcoming ETF approval decisions are closely watched. A rejection could catalyze further downside. However, if the applying institutions actually hold Bitcoin, an approval would be bullish.
Either way, once Bitcoin ETFs are approved, I believe Ethereum will outperform Bitcoin from that point onward—marking the bottom of the ETH/BTC ratio.
What other stories will you invent to encourage Bitcoin buying? Afterward, speculation will shift to Ethereum ETF approvals—which may take longer. Personally, I continue DCA’ing into Ethereum on every down day. If we see another sharp dip, I’ll buy a large amount outright. Minimize regret. Ideally, I’d like to keep DCA’ing for another six months—but I seriously doubt such an opportunity will exist.
NFT Bottom
The NFT market has likely bottomed and already experienced its “DeFi 2022 moment” this summer. With all the clearances on Blur and the Azuki incident, sentiment hit rock bottom.
People often forget that the NFT surge in early 2021 followed massive wealth accumulation by crypto natives during DeFi Summer 2020, which then spilled into NFTs. In my view, for NFTs to enter another bull run, people need to generate substantial profits elsewhere in the market first.
Contrary to some opinions, I don’t believe NFTs are dead—they will persist. Why? Because those who make money in this industry (or any industry) have an inherent desire to show off. Given that most in this space spend significant time online, they want a digital way to display their financial success. There’s no better way than switching to an extremely expensive PFP.
However, even though the market has bottomed, that doesn’t mean most collections will survive—most will die. The task is identifying which ones you believe will endure long term. I have my personal list of collections I believe will survive the current “production war”:
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Cryptopunks;
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Pudgy Penguins;
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Milady & Remilio;
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Kanpai Pandas;
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DeGods.
Overall, I believe NFTs will be the last sector to rally. You won’t see a real NFT bull market until ETH, BTC, and DeFi lead the way. Still, their prices will gradually rise—that’s why you must pick your winners now. When the NFT bull run arrives, prices will go absolutely parabolic.
Other Ecosystems
Solana appears to be reviving and will remain a key player in the L1 landscape. Despite the DeFi ecosystem built during the SBF era being a farce, they still possess a strong community and are rebuilding.
I’ve been building my SOL position since Robinhood cleared user positions at the bottom, and I’ll continue adding on dips. How do I size my SOL position?
If I believe SOL has potential to return to its ATH (~$250), and I expect ETH’s peak to reach $10,000, then compared to ETH’s 5.5x gain (let’s round to 5x), SOL offers a 10x upside.
Therefore, according to my hedging philosophy, I keep my SOL position half the size of my ETH position. No need to scale larger—this gives me similar exposure. Risk-adjusted returns are comparable to ETH, making it a lower-risk move.
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Degen Sensei
