Opportunities and challenges after the Crypto Market Turmoil: a rally or another bear market? ｜Weekly Market Insight Recap

5 min readAug 28, 2024

During the official YouTube livestream at 8 PM on August 22nd, Daniel Yu, Director of Asset Management at Matrixport, shared his insights on the opportunities and challenges during the current crypto market. He also provided investors with comprehensive market analysis and strategy recommendations to help them make informed decisions in a complex market environment.

Key takeaways from the YouTube livestream

Daniel analyzed the signals of a market rally for the week (August 18th — 24th). He pointed out that the growing market expectation of a shift of the Fed policy may be due to the recent US employment report overestimating the degree of economic weakness. Although such an expectation may drive a short-term rally of risk assets like Bitcoin, investors should remain cautious about a bear trap. Besides, the massive Bitcoin transfer by Mt. Gox may have again triggered market concerns over sell-off pressure. Investors should closely follow large-sum transactions and evaluate their potential impact on market liquidity.

Market overview

Recently, Bitcoin saw a rapid dip to $57,000 from around $62,000 and has since been trading in the range. The overall market sentiment has been bearish. According to investment research reports, ROI has decreased, especially with quantitative and arbitrage strategies. Selling of Bitcoin and other tokens by large institutions such as Mt. Gox and the US government has pushed up the volatility. The market has been impacted by the quantitative trading strategies of institutions, with new highs frequently followed by price dips.

Funding rate of perpetual contracts bottomed

The funding rate of perpetual contracts hit the lowest level in recent years and was once in negative territory. While the short-term ROI remains low, the long-term ROI is relatively high, reflecting short-term market uncertainty.
The force on the short side has been strong. Each price inflation was followed by a sell-off, reflecting a fluctuating market sentiment.

Ethereum performance and short-term short side pressure

Ethereum has been underperforming, seeing a low level of on-chain activity and price. Institutions prefer shorting in futures over spot selling.

Crypto market expectation and Bitcoin demand-supply relationship

Bitcoin is regarded as “digital gold”, and its valuation is vulnerable to supply-demand dynamics and macroeconomic factors. In comparison, the valuation of Ethereum and other assets relies more on on-chain activity and operation.
After breaking the bottom supporting level, a market rally is likely to happen. However, the impact of institutional sell-off and rate-cut expectations should be closely monitored. While Bitcoin is yet to reach a new high, US stocks and gold are showing robust performance.
The long-term ROI of Bitcoin benefits from limited supply and shift in monetary policy, while Ethereum and other assets are faced with different valuation challenges. For investors who are seeking stable returns, quantitative strategy, and structured products are good choices. When choosing a product, investors should pay attention to the range of max loss and earnings.

Impact of Fed rate cut on crypto market

As Bitcoin price failed to meet market expectations after halving, investors are expecting Fed rate cuts. So far, the probability of a rate cut decision on September 24th has greatly increased, except that the margin by which the rate cut will be introduced remains debated.
With the rate cut, the market will reach a bottom supporting level, with potential upward momentum and some positive expectations. However, a significant rally or a direct jump into a long market is unlikely, as relevant impacts have been priced in.
With this rate cut, some crypto tokens or projects will not become attractive to global users (except Bitcoin). On the contrary, a lot of institutional money or quantitative strategies will gain absolute returns. This is because institutions are in an advantageous position against individual users in many aspects, including staff, trading teams, trading systems, and information. In this case, financial management appears to be a good choice.

Portfolio allocation under current market

Capitalize on high volatility for earnings

Strategies for investing in high-volatility assets: analyze the fundamental logic of high volatility of the crypto market (similar to the logic of tidal power generation), and discuss how to secure returns through strategy investment in a high-volatility crypto market.
Select a professional institution: in the current market, a lot of quantitative trading transactions are taken over by machines, where frequent trading increases the probability of mistakes. By working with professional institutions and using their quantitative tools and products, users can make risk-averse investments amid volatility.
Structured products: in a sluggish market, investors are recommended to employ structured products and quantitative strategies. Matrixport has several offerings that can capitalize on market volatility, including SharkFin, Snowball, Dual Currency, etc.

Crypto market segmentation and portfolio allocation

The cycle of the crypto market: every cycle of the crypto market includes 5 stages: mid-bull, top, mid-bear, bottom, and early-bull. Currently, most investor expectations are on early-bull or mid-bull, yet to reach the top.
Market expectation and investment advice: given the current market conditions and risk management requirements, it is recommended to add a few personalized offerings such as structured products (SharkFin, Snowball, Dual Currency, and Smart Trend) to secure stable earnings in a volatile market.
Core-satellite strategy: invest most of the assets in principal-guaranteed products with stable returns, and a small portion in high-return structured products, to earn returns in a volatile market with strategy investment and portfolio construction. For example, users can invest 70%-80% of their assets into principal-guaranteed products, and the rest 20%-30% into high-return high-risk financial products for risk management.

Collar option strategy and risk management

Option strategy and risk management: compared with direct mortgage lending, the collar option enjoys a funding rate as low as 4% for USDT. This can help miner investors concerned about margin call and tail risks reduce their capital cost and prevent risks in a high-volatility environment.

Check out the recording of our YouTube livestream for more details: https://www.youtube.com/watch?v=Qwzworphd_w

About Matrixport Weekly Market Insight
[Matrixport Weekly Market Insight] is an interactive knowledge-sharing column newly launched by Matrixport, and will be livestreamed each week on the Matrixport official YouTube Channel. We will invite industry-leading product managers, top analysts, and KOLs to discuss investment strategies under different market situations and share their investment experiences.
Subscribe to the Matrixport YouTube Channel to stay tuned on the latest market developments.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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