After a day of bulls returning, then face-washed by a waterfall: how to survive in the volatile crypto market?
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After a day of bulls returning, then face-washed by a waterfall: how to survive in the volatile crypto market?
In such an extremely volatile market, it is difficult to achieve long-term profits by luck alone; only investors with highly sophisticated trading strategies can survive in extreme environments and potentially profit from them.
Navigating Web3 tides with focused insightsOriginal: Jordi Alexander, Founder of Selini Capital
Translation: Yuliya, PANews
Just one day after the market achieved its largest single-day market cap gain in history, it suffered the second-largest daily drop ever. Such extreme volatility caught market participants off guard.
Many traders have incurred severe losses under these conditions. On one hand, driven by panic or technical breakdown signals, they sold off their holdings at the bottom; on the other, they blindly chased rallies fueled by short-lived rebounds or positive news, only to be hit again when the market collapsed a second time.
During the frenzied bull run of November 2024, the overall market expanded rapidly, and most investors leaned toward long positions, making profits relatively easy. However, in today's highly volatile environment, sustained profitability cannot rely on luck alone. Only investors with highly professional trading strategies can survive—and potentially profit—in such extremes. They typically adopt the following approaches.
Cash is King, Liquidity First
In highly volatile markets, holding sufficient cash is critical—even if it means sacrificing some expected value (EV) to ensure liquidity.
Take Jane Street, a proprietary trading firm, as an example. It consistently allocates capital to purchase deeply out-of-the-money put options. Even though this strategy may incur ongoing short-term losses, during market crashes, the firm’s abundant liquidity allows it to acquire mispriced assets at bargain prices. Compared to traditional financial markets, leverage is far more widespread in crypto, leading to more severe liquidity mismatches—making this strategy even more crucial.
Some top-tier traders prefer to gradually reduce positions in the "shoulder" zone during sharp market rallies, rather than waiting for an extreme peak at the "head." While this might mean missing out on some upside in the short term, recycling capital enhances their ability to re-enter at more attractive price levels—offering long-term advantages.
Focus on Price, Not Time
Top traders are typically not constrained by timeframes but instead define trades based on price. For instance, during the previous bull cycle, trader High Stakes Capital shared screenshots showing eight-figure profits from his FTX account—all built from positions established just two months prior. This illustrates that in extreme markets, time isn’t the key variable; what matters is clearly defined entry and exit ranges.
Trading logic should be grounded in two principles:
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Identify clear buy prices supported by strong value metrics, avoiding emotional decisions due to short-term fluctuations.
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Set explicit risk-reward ratios and target exit prices, then execute decisively when those levels are reached.
Then exercise patience—whether it takes hours or weeks—and act only when prices reach your targets. At the same time, continuously adjust your “ideal entry” and “ideal exit” prices as the market evolves.
Being overly rigid about timeframes—such as “only day trading” or “only multi-week holds”—inevitably limits performance. The core mindset of elite traders is simple: “Buy low, sell high.” The holding period is determined entirely by market movement.
Execute Calmly, Stick Rigorously to the Plan
In extreme market conditions, position size must align with one’s actual capital strength. If positions are too large and the market keeps falling, traders may suffer psychological distress from unrealized losses, causing them to deviate from their original plan.
Given that the current market still has ample bullish catalysts and strong liquidity, a prolonged, multi-year bear market is unlikely. This macro-level conviction helps some investors maintain confidence during downturns. At the same time, they don’t expect an immediate “altseason” breakout, so they take profits incrementally during rallies and patiently wait for more attractive re-entry opportunities.
When deciding whether to sell, some investors apply a mental filter: Is it likely that this price level will drop again? If yes, it suggests the current level isn't an optimal entry point, warranting caution and waiting for a better risk-reward setup.
Market Practice: Trading Strategies in Range-Bound Markets
Take Bitcoin as an example. When the price dropped from $100,000 to $90,000, some traders began building positions in stages. They steadily bought around $90,000, reaching full intended allocation by $82,000, prepared to hold for the long term.
However, the market fell further to $78,000–$79,000, increasing short-term paper losses. Yet from a risk-reward perspective, investment appeal actually improved at these levels. As a result, some investors chose to free up additional capital to add to their positions rather than passively stop out—based on long-term structural analysis indicating no prolonged bear market.
Their average cost ultimately dropped to $83,000–$84,000, positioning them well for solid returns if the market recovers to $100,000.
As the market rebounded, early bottom-fished positions at $78,000 were partially taken off at $85,000 to preserve liquidity for potential pullbacks. Meanwhile, the core portion of the position remained intact according to plan.
If the market doesn’t retrace but moves straight up, full profit-taking would occur in the $87,000–$93,000 range, followed by waiting for the next ideal entry. If the price breaks above $95,000 without retracing to $88,000, the new target entry is adjusted upward to $90,000. Once the market dips back to $90,000, buying resumes in stages, with strategy dynamically refined based on evolving price action.
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