The translation for your request is: "The mini bull market is hard to sustain, and the second major crash after FTX is on its way."

Original article "The Second and Final Crypto Crash," author: Ann, translated by Odaily jk, the following views do not represent Odaily and do not constitute investment advice.

Bear markets usually go through a large-scale price decline, which lasts for a long time at the bottom until it ends many years later. The previous market cycle (2018) went through such a situation, followed by the black swan event of 2020 - the macro market crash caused by COVID-19. In November 2022, when FTX encountered problems and the Bitcoin price reached $16,000, it experienced a similar 50% price crash like in 2018. And we are about to face the second similar crash.

2018 = 2022, 2020 = ?

There are disturbing similarities between the market crashes of 2018 and 2022, which are more caused by the cryptocurrency industry itself rather than macroeconomic factors. This is a clearly cryptocurrency event, not triggered by the collapse of the entire market. Yes, this crash occurred when the Federal Reserve was raising interest rates, but the final blow came from our own Sam Bankman.

The crashes of 2018 and 2019 were the first "shocks" after reaching historical highs, the first bottoms.

Market crash after the bull market from 2012 to 2019

FTX Crash in the fourth quarter of 2022

After these two crashes, there was a rebound that made people mistakenly believe that "the market has recovered." However, in a bear market, there is usually a retesting process before the market truly recovers.

In the previous bear market, this "retesting" was caused by the market crash triggered by the COVID-19 pandemic. I believe we are now also facing a similar situation, waiting for an equivalent event in 2020.

Regarding the second crash, I noticed some characteristics:

• Prior to the crash, there was a sentiment of rebound and "the market has recovered." Not only did prices rise, but developments like institutional adoption (e.g., BlackRock Bitcoin ETF) were also in this atmosphere.

• The seeds for the next bull market have already been sown. It was the "DeFi Summer" from 2019 to 2020. And now, any market resembling the DeFi summer is an "Infra Summer." I believe restaking will play a significant role in it.

• More importantly, unlike the first crash, the second crash was influenced by major macro events that were completely beyond the control of the cryptocurrency industry.

US Stock Market Rise Will Stop

In regards to the last point, the signs of those macro influences have already emerged. Over the past year, the Nasdaq index has shown vulnerability and recently had its worst performance since February. Interestingly, cryptocurrencies did not follow this rise, which perhaps indicates more skepticism towards the Nasdaq's "dead cat bounce".

This is like digital assets not believing in this rebound. It can be imagined that if the Nasdaq falls, then cryptocurrencies, which already have doubts, will not have a good reaction.

Economic Recession Often Occurs During Interest Rate Cuts

In addition, rate hikes are expected to have an impact. In the past, economic recessions did not occur when the Federal Reserve raised rates, but rather when they began to lower rates.

As shown in the following figure, the gray overlay marks the economic recessions, and it can be seen that they always occur during periods of rate cuts. This was the case both in the 2008 financial crisis and the dot-com bubble burst in 2000.

Source: https://www.macrotrends.net/2638/sp500-fed-funds-rate-compared

Q2 Performance

We are also approaching the release of Q2 2023 earnings reports, which are expected to be disappointing as the post-pandemic boom has started to wane.

The company is expected to announce its earnings report this week. We can expect market volatility while the price of Bitcoin has remained steady in recent weeks, indicating preparation (in technical analysis, this suggests that the Bollinger Bands are contracting - a period of calm before the storm). This indicates that volatility will soon be approaching, although this indicator alone cannot determine price direction.

Aside from short-term reactions, this week's earnings reports could become the first domino in a larger macroeconomic event. We will soon find out.

A debt crisis is emerging. Now, due to the rate hike, interest payments in the United States have skyrocketed to $1 trillion. It remains unclear how the government will pay for this massive expenditure without cutting spending in other areas, but it is worth paying attention to.

15% increase in US government spending in June

How to be prepared?

For all potential doomsday events, the more pressing question is how should we, as individual market participants, respond to potential volatility.

I have a few suggestions, with the most important ones being:

1. Do not lose funds due to trading low-quality currencies

What sets this bear market apart is that we are still inundated with junk coins, poorly performing projects that were once popular. From trends like Azuki in 2022 to the recent frenzy around "memecoins," the market has consistently tried to scam away your last dime.

As I write this article, yet another infuriating project called "Worldcoin" has launched their token. If I were to list some of the recent money-grabbing projects that have been popular on social media, I would include Rollbit, Hamster Coin (what were you thinking, people on social media!), and the Arkham Intelligence company as fraud cases from June to July 2023.

This behavior, attempting to take away your money, seems to have no end. Never fall into their traps.

2. Income-generating assets

I know you might wonder that even if Ethereum has a 5% return rate, it won't be able to offset the losses in a 50% digital asset crash. But looking at the return rate alone is not enough. For me, the biggest benefit of "harvesting" my digital assets (I use the term "harvesting" broadly, covering various DeFi strategies that allow me to generate income) is that once the assets are securely stored in a DeFi treasury, I become reluctant to intervene. For example, unlocking certain tokens may require a 7-day wait. It can help prevent panic selling during significant price drops.

Rather than focusing on the return rate, it's more about preventing shaky hands.

3. Observe the Loan Levels

Recently, as the price of Bitcoin rose to $20,000 and the price of Ethereum rose to $2,000, some people have started borrowing more boldly (using temporarily appreciated assets as collateral).

I'm not a fan of this practice. The market volatility over the past year is not suitable for managing loans. The price fluctuations are too great and can make you sweat. Unless you enjoy this kind of excitement, I believe loans will only bring too much trouble, too much risk, and little return.

4. Take It Easy...And Watch the World Burn

When I tweet that I like bear markets, I'm not exaggerating at all. The recent ETHCC event in Paris and all its associated activities show that the crypto community is more vibrant than ever after the visitors leave. Development work hasn't stopped, and there are more projects to help you stay focused.

In addition, the chaos in the traditional financial sector seems worth observing. We will see how the old ways of traditional finance end their vulnerabilities, and if they collapse, crypto will rise as the new generation financial system. I suggest we all grab some popcorn and watch.

It may sound a bit cold, but understand it as "relax and don't worry too much." Things may get worse before they get better. Human society has its own mysterious way of evolving, and this may just be one of the processes.

Most importantly, hold onto your money and survive.