Finding Liquidity in A Bearish Market Episode 2: Ride the Dragons
Assuming we agree that the overall sentiment towards cryptocurrency is about to further weaken over the coming months, the questions would be how to seize opportunities without fighting against the trend too hard to get yourself burnt.
Here come the short answers:
Where would the market go? South.
How should we trade? Shouldn’t.
What could we invest in? Few.
But the real case is never this simple, shouldn’t we be either.
From where I stand, I see our users, a certain proportion of who are retail or small-volume investors, being much less active in trading. This accordingly leads to smaller volume, in other words, liquidity dry-out or thinner order book, which in return discourage more users from trading.
It’s reasonable. Retail investors who have less access to information, expertise and data for making decisions need to trade in a market that is large and efficient enough, as in such market, the momentum (either upward or downward) would be so strong that it’s hard for them to resist the trend — less likely for a catastrophic loss, or an over-joyful profit.
However, just like the western and eastern cultures have completely opposite interpretation of Dragon, one man’s trash may be another man’s treasure. When it comes to professional traders, or institutional investors, or you could call them large-volume users in general, the scenario is very different.
What distinguishes these market forces from smaller participants most prominently is that the big fishes calculate, and we here are talking about seriously head-scratching math.
Let’s leave the malicious speculators (or exploiters) out for a second — although there certainly are some always seeking to gank the weaker ones — other large-volume players with resources and know-how look into fundamental carefully.
Such diligence might be comprised in an insanely bullish market, as a SECOND thought might cost million-dollar profit under that circumstance, where controversial targets may outrun those with solid fundamentals given that the blindly upward market amplified the positive driven factor while easily hid the risk.
But a slow market allows them to take as much time as they should to dig down to the bottom layer, to truly dissect the fundamental and identify target with potentials. This, in the longer term, will surely be helpful to cultivate a healthier and more efficient market.
Plus, I believe after the quarters-long and still ongoing correction to the frothy market, more big players from outside, traditional financial market participants specifically, will be lining up to step into the crypto world.
That’s why KuCoin has shed a light on developing and optimizing the functions serving large-volume users in building the Version 2.0 trading system, on which various functions will be offered, including but not limited in orders like fill-or-kill, immediate-or-cancel and good-till-time. Additionally, API as one major tool for professional investors has also attracted significant attention.
You ask what about existing retail investors? Better liquidity, more efficient market place, thicker order book, smart counterparts — nah, maybe not the last one — anyways, why wouldn’t they turn down the chance to be offered more options?
Elsewhere, I have been noticing an interesting phenomenon recently, which I also consider to be some kind of “dragon” — tokenization of traditional internet projects.
The bright side of such targets is that they usually are built on a big existing user base, which hopefully are able to direct a certain portion of the traffic to the blockchain world. However, there also is this tricky question — does the blockchain technology truly add value to the original project?
The answer is critical, as such projects are usually those trying to find their way to survive a fierce competition (where they have limited advantage). Only if this new-generation internet technology equipped the target with something unique, it might have a game. Otherwise, it hardly is something rather than a waste of time and money.
Thus, ride the eastern dragon to the moon, or be eaten up by the western dragon? Be vigilant, my friend.
So, to wrap up, here come the longer answers for the previous questions:
Where would the market go? Volatile, but from immature to mature, from disoriented to efficient in the long run.
How should we trade? Do some homework and learn, the fundamental matters.
What could we invest in? Value coins, maybe think about buy-and-hold strategy.