Before the Spring Festival, the crypto ecosystem was dragged down by the DeFi-related sell-off in the US stock market.
As a result, during the Spring Festival period, the crypto ecosystem was again dragged down by the US stock market sell-off caused by Trump's tax hike.
Although I had previously guessed that Trump might be the biggest "black swan" for the crypto market in the future, I didn't expect this black swan to emerge so quickly, and I couldn't have imagined that this black swan would be the tariffs, which seem to have little to do with the crypto market.
According to the information currently revealed by some exchanges, it is estimated that nearly $10 billion in assets were liquidated during this crypto market crash.
For users who used leverage, the losses will be very severe, but for users holding spot assets, the losses can still be controlled. I hope our readers will try not to use leverage and limit their losses in this market crash.
For the future market development, I still have hope and still believe that the market has not completed its cycle, as innovations are still emerging in the ecosystem.
However, we retail investors need to strengthen our psychological resilience and enhance our ability to withstand such violent fluctuations, as we may face new "black swan" events in the future.
If we carefully observe the market fluctuations before and during the Spring Festival, we will find that on the one hand, the crypto market, as always, is subject to interference and influence from the traditional US stock market, and on the other hand, the crypto market appears to be more fragile and sensitive than the US stock market.
The US stock market often regains its vigor to a large extent in the subsequent rebound after a deep dive. But the crypto market is not the case, often recovering quite weakly after a deep dive, and requiring a longer time and greater positive news to recover to a certain extent.
If we accept that the current crypto market is increasingly influenced by traditional capital and traditional investors, then the crypto market, in a rather crude way of speaking, seems to be increasingly like a "night pot" among "risk assets" - taken out when needed and thrown aside when not - when the mainstream risk assets (such as US stocks) are doing well, crypto assets will follow suit; and when the mainstream risk assets are hit, crypto assets will be hit even harder.
This phenomenon began to show some signs in the previous cycle, but it is very evident in this cycle.
I always try to think about the reasons behind this phenomenon, because I always believe that the crypto ecosystem is quite different from the traditional financial market, and it is another parallel world with its own unique development path and rules.
Just like gold and US stocks, although both are financial assets, their intrinsic properties are completely different, and their trends and internal logic are often not strongly correlated.
The crypto ecosystem should also be the same, it should not always play the role of a "night pot", it should walk out its own market trend.
However, the reason why crypto assets are currently so heavily influenced by the traditional financial market may be related to three current situations:
First, the overall size of the crypto market is still not large enough, and any "wind and grass movement" will cause violent fluctuations in the market with a certain amount of capital flow;
Second, the lack of regulation in the crypto market leads to uncontrolled leverage risk, which can easily amplify risks and exacerbate market volatility during market fluctuations;
Third, the crypto market has not yet formed its own unique driving force and development model, and in the eyes of the dominant traditional capital, it is just an additional topic rather than an ecosystem that can walk out its own market trend. Therefore, when risks arise, the crypto ecosystem's assets may be the first to be abandoned.
Further thinking, I believe that the third situation is the root cause of the other two.
The so-called crypto ecosystem has not yet formed its own unique driving force and development model means that this ecosystem has not yet formed applications and scenarios that can break out of the circle and attract a large number of users outside the circle.
Putting aside the positioning of Bitcoin as "digital gold", from the earliest ICOs to the DeFi, NFTs, and chain games of the previous cycle, the applications they have spawned are mostly still serving users within the ecosystem - the real users who use these services through crypto wallets.
For the vast majority of users who buy and sell on CEXs, they are actually not the real users of this ecosystem, but merely investors.
So these applications have not essentially broken out of the circle, nor have they brought in a massive number of users.
This is completely the opposite of what we see in real-world internet applications - in our real lives, almost everyone uses WeChat, everyone uses Alipay, but we have very few people investing in Tencent or Alibaba.
From this comparison, if the crypto ecosystem does not see the emergence of crypto applications that can match the massive user base of the internet, I estimate that the crypto ecosystem's "night pot" role may continue to play out.
But when will such crypto applications appear?
From the ICOs to the present, we have seen too many applications that combine blockchain with "physical" or "off-chain", but 99.99% of them are false demand and false applications, and so far it seems that none of them have broken out of the circle or even become a hit.
In this cycle, can we see the emergence of such applications?
