Compiled by: Vernacular Blockchain
This past week has been a historic one in the cryptocurrency world. We’ve seen the worst liquidation in the space’s history, with reports of a staggering $2.3 billion, and unconfirmed reports of liquidations as high as $10 billion as trading platforms’ APIs were overloaded. This violent crash was followed by a dramatic rebound, with Bitcoin and many altcoins rising 20% to 30% in just a few hours. As the dust settles, investors and traders are left with one question: what happens next?
1. What caused the crash?
The crash was triggered by a combination of macroeconomic and geopolitical events. The aggressive tariff policy reintroduced by the new Trump administration has unsettled global markets. Specifically, the announcement of a 15% tariff on US coal and liquefied natural gas products, along with a 10% tariff on US crude oil, has shaken risk assets like cryptocurrencies like a shock wave.
The news served as a catalyst for a massive chain reaction of liquidations, with leveraged positions being forcibly liquidated, further exacerbating downward pressure. The speed of the decline was unprecedented, highlighting the fragility of a market that relies heavily on leverage.
2. The rebound: a case of extreme volatility
Interestingly, the market that collapsed under the pressure of liquidation quickly rebounded after the news that the United States, Canada, and Mexico reached a temporary tariff suspension agreement. Bitcoin surged from $91,000 to $102,000, while altcoins fluctuated even more dramatically, with some even rising by more than 30%.
This volatility highlights the current market environment, which is driven more by news headlines than fundamentals. For traders, it is a gold mine; for long-term investors, it is a test of emotional resilience.
3. The future: where should we go?
While the worst of the downside may be over, the market is unlikely to experience a quick V-shaped rebound. Instead, we expect to enter a period of consolidation, with price volatility likely to be high as the market digests recent events and awaits new catalysts.
4. Key Observations
Altcoins are structurally weak: Many altcoins remain structurally weak and face continued selling pressure, especially from retail investors who are looking to reduce their positions after recent losses.
Retail sentiment: Retail traders generally tend to be risk-averse after experiencing significant losses, which further suppresses demand for speculative assets.
Sensitivity to News: Markets remain highly sensitive to geopolitical events, particularly regarding U.S.-China trade relations and possible monetary policy changes.
5. Which cryptocurrency categories may rise next?
Despite the current headwinds, several sectors have shown relative strength and could lead the next rally:
Real-world asset (RWA) tokens: These tokens have shown resilience amid recent volatility. Projects like ONDO and CHEX have shown strong price action, suggesting growing investor confidence in tokens backed by physical assets.
AI-driven crypto projects: Artificial intelligence remains a hot topic, and projects like VIRTUL demonstrate strong fundamentals and growing user adoption. As AI technology continues to develop, these tokens may have significant upside potential.
Decentralized Finance (DeFi) Protocols: Decentralized Finance projects with robust revenue models and strong community support are likely to outperform others. Focus on protocols that can consistently generate fees and innovate in areas such as lending, derivatives, and on-chain asset management.
Infrastructure Tokens: Tokens that provide critical infrastructure to the crypto ecosystem, such as SOL (Solana), HBAR (Hedera), and HYPE (Hyperliquid), have shown impressive resilience and may benefit from a recovery in risk appetite.
Featured Memecoins: Although the memecoin craze has cooled, established names like PEPE with strong community support may see a resurgence during the bull run.
6. Actionable investment strategies
Given the current market environment, here is a four-step plan for optimizing your cryptocurrency portfolio:
1) Cut back on underperforming assets: Evaluate your holdings and reduce those you no longer like, especially those that have failed to recover strongly in the recent rally.
2) Concentrate investment in high-conviction projects: Focus on projects with strong fundamentals, clear application scenarios and proven resilience. Diversify investments in promising areas such as real assets (RWA), artificial intelligence (AI) and decentralized finance (DeFi).
3) Maintain adequate stablecoin reserves: Allocate 20% to 35% of your portfolio to stablecoins to maintain flexibility in future market pullbacks or emerging opportunities.
4) Be patient and develop a strategy: Enter new positions only when a major liquidation event or trend reversal is confirmed. Avoid chasing highs and selling lows, and focus on high-risk/high-reward opportunities with clear technical and fundamental support.
7. Summary
Crypto markets are volatile by nature, but it is in this volatility that opportunity lies. While the past week has been brutal for many, it has also provided valuable lessons about risk management, high-conviction investing, and staying adaptable.
As you move forward, keep your eye on the long-term trends, stay strategically disciplined, and always be prepared for the unexpected. The next big opportunity is often just around the corner, the key is to be ready to grab it when it arrives.
