Bitcoin Bear Market Analysis: Market Trend Predictions in the Era of ETFs

The current market conditions indicate that we are likely in a Bear Market. With few exceptions, the vast majority of cryptocurrencies have experienced a decline of over 40%. So far, Bitcoin has dropped by 23%, and is down 30% from its previous low, making the overall situation quite pessimistic. In the context of Bitcoin's weakness and the macroeconomic and liquidity backdrop, emerging cryptocurrencies and meme coins face selling pressure with each rebound. However, as long as we avoid over-leveraging on every minor pullback, there are still opportunities in the future.

As a trader, I cannot accurately predict the future direction of Bitcoin, I can only formulate buying and selling strategies and follow the market. In the current context of the ETF era, I will explore several scenarios that may present in the Bitcoin bear market.

Scenario One: Long-term Consolidation at the Bottom

This bear market may last longer than the previous one, potentially requiring several years of fluctuations to hit the bottom. Compared to a sharp drop of 75% within a year, a slow decline of 50% over three years is more painful. Similar to the S&P index during the stagflation period of the 1970s, there were opportunities, but it took 7 years to reach a new high (1973-1980). The second round of decline in the 1970s took 2 years to complete a 50% correction, and the first round also took nearly 2 years to achieve a 38% drop from November 1968 to June 1970 (.

The high inflation and low growth environment during stagflation has resulted in actual declines being more severe than they appear. Currently, there are signs suggesting that stagflation is brewing, but more data is needed to confirm this. The central bank may have to make trade-offs between stabilizing prices and balancing employment, leaning towards accepting high inflation rather than deflation.

The options market may lead to a painful slow decline. Large participants buy put options to hedge their spot exposure, while market makers sell options and maintain delta neutrality by selling the underlying. As the options expiration date approaches, market makers closing or adjusting their positions may lead to two scenarios:

1. The buying pressure from market makers has eased the decline, with prices slowly falling for several months, accompanied by significant fluctuations near the options expiration date.

2. Market makers buy to drive up prices, closing positions at expiration to restore neutrality. Volatility increases, resulting in losses for most participants. The cycle continues until selling pressure dominates or more marginal sellers exit.

This situation is most unfavorable for investors who chase rallies and sell on dips, as every slight rebound may give them hope.

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Scenario 2: Traditional Bear Market Pattern Reappears

This could be a relatively better scenario. After Bitcoin peaks, leverage positions increase, smart money exits, and liquidations lead to a significant pullback. Bitcoin slowly declines, and after facing resistance during a rebound, it further drops. A collapse of exchanges or large funds triggers the final capitulation, falling 70-80% from the highs. The market generally believes that crypto assets are dead, while early sellers start accumulating at the bottom.

In this case, the Bear Market may last for about 14 months, providing investors with a good entry opportunity. However, considering factors such as increased market maturity, improved liquidity, and lower leverage among large holders, the likelihood of such an extreme correction is relatively low. Unless a catastrophic event occurs, an 80% correction is difficult to achieve.

Altcoins may still pull back by 50-60%. In the current environment, traditional finance is leaning towards risk aversion, cryptocurrency investors are fatigued, liquidity is dispersed, and everyone is watching Bitcoin's trends. Altcoins may rotate among various sectors, overall dropping 90% from their highs. In the short term, unless there are significant positive developments such as adoption by traditional finance, it will be difficult for altcoins to see a noticeable rise.

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Scenario 3: Rebound After Short-term Correction

The likelihood of this situation is very small. Even in the most optimistic scenario, Bitcoin is unlikely to sustain its rise, and each rebound may encounter selling pressure. Before the liquidity environment improves, trade policies become clearer, and economic data turns better, investors should prioritize capital preservation.

Overall, before the economic and geopolitical uncertainties are resolved, Bitcoin is unlikely to hit historical highs. Investors should prepare for various scenarios and adjust their positions flexibly. The current market is suitable for trading, but patience and discipline are required. Bulls should lock in profits during rebounds, and bears should also be cautious, as Bitcoin has already dropped nearly 30%, while altcoins have fallen over 50%.

Although an optimistic attitude often brings more returns, investors should be prepared for further downturns at this stage. There are many uncertainties in the market, and even when favorable factors appear, the price response is not ideal. Staying alert and adjusting strategies in a timely manner will be a wise choice.

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