For crypto investors who experienced the grand bull market of 2020-2021, the current market is undoubtedly confusing and agonizing. That was an era ignited by global central banks' massive liquidity injection, with overflowing liquidity and universal price increases, where seemingly buying any project blindly could yield amazing returns. However, those days are long gone. Now, the global financial market hangs in a delicate balance: on one side are surprisingly strong U.S. economic data, and on the other, the Federal Reserve's unwavering hawkish stance, with a historically high interest rate environment weighing heavily on all risk assets.

This paradigm shift dominated by the macro environment has made the current crypto cycle the "most challenging era" for retail investors. The previous "liquidity-driven bull" model relying purely on emotional speculation has failed, replaced by a "value bull" market that emphasizes intrinsic value, driven by clear narratives and fundamentals.

However, on the flip side of difficulty lies opportunity. When the tide recedes, true value investors will usher in their "golden age". Because it is in such an environment that institutional compliance entry, technological programmatic deflation, and real-world applications integrated with the real economy can highlight their true, cycle-transcending value. This article aims to deconstruct this profound transformation and explain why this era that feels challenging for speculators is precisely the golden path paved for prepared investors.

I. The Most Challenging Era: When the "Liquidity Flood" Recedes

The difficulty of this cycle stems from the fundamental reversal of macroeconomic monetary policy. Compared to the extremely friendly environment of the previous bull market with "zero interest rates + unlimited quantitative easing", the current market faces the most severe macro headwinds in decades. The Federal Reserve's unprecedented tightening cycle to curb the most severe inflation in forty years has doubly suppressed the crypto market, completely ending the old mode of easy profits.

1. Macro Data Puzzle: Why Rate Cuts Seem Distant

The key to deciphering the current market's predicament lies in understanding why the Federal Reserve is reluctant to ease at the end of its rate hikes. The answer is hidden in recent macroeconomic data - these seemingly "good" data have become "bad news" for investors hoping for easing.

Stubborn Inflation and Hawkish Dot Plot: Although inflation has fallen from its peak, its stickiness far exceeds expectations. The latest data shows that while the U.S. May CPI year-on-year rate was slightly below expectations, the core inflation rate remains stubbornly high at 2.8%.

This is still significantly far from the Federal Reserve's 2% target. This stickiness is directly reflected in the Fed's latest economic projections (SEP) and the closely watched "dot plot". After the June meeting, Fed officials significantly lowered rate cut expectations, reducing the median number of cuts this year from three to just one. This hawkish shift has heavily dampened market optimism. As Powell said in the post-meeting press conference: "We need to see more good data to increase our confidence that inflation is continuously moving towards 2%." In other words, the Fed's threshold for rate cuts has become very high.

Robust Job Market: Meanwhile, the U.S. labor market continues to show remarkable resilience. The May non-farm employment report showed 139,000 new jobs, better than market expectations, with the unemployment rate remaining low at 4.2%. A strong job market means consumer spending is supported, which in turn puts upward pressure on inflation, making the Fed more hesitant about rate cuts.

Powell's "Historical Script": As Nicholas Colas, co-founder of DataTrek Research, points out, the current chairman is following his predecessors' script, adopting a hawkish tone in the final stage of his term to solidify his historical legacy of successfully curbing inflation. This consideration of personal and institutional reputation means that unless economic data shows a cliff-like decline, policy shifts will be extremely cautious and slow.

2. The "Gravity" of High Interest Rates: The "Bleeding" Effect on Crypto Assets

This macro background directly leads to the crypto market's difficult situation:

• Liquidity Drought: High interest rates mean less "hot money" in the market. For the crypto market, especially Altcoins, which heavily rely on new funds to drive price increases, the tightening of liquidity is its most fatal blow. The previous "universal price increase" has been replaced by a structural market with "sector rotation" or even "only a few hot spots".
• Dramatically Increased Opportunity Cost: When investors can easily obtain over 5% risk-free returns from U.S. Treasury bonds, the opportunity cost of holding assets like Bitcoin that don't generate cash flow and have extreme price volatility increases dramatically. This causes large amounts of funds seeking stable returns to flow out of the crypto market, further exacerbating the "bleeding" effect.

For retail investors accustomed to chasing hot spots in an environment of abundant liquidity, this change is brutal. Strategies lacking deep research and purely following trends are highly likely to suffer severe damage, which is the core of this cycle's "difficulty".

In April 2024, Bitcoin's fourth "halving" will reduce its daily new supply from 900 to 450 coins. This code-defined, predictable supply contraction is the unique charm that distinguishes Bitcoin from all traditional financial assets. With demand (especially from ETFs) remaining stable or even growing, the halving provides a solid, mathematical underlying support for Bitcoin's price. Historical data shows that Bitcoin's price reached all-time highs within 12-18 months after each of the previous three halvings. For value investors, this is not a short-term gimmick, but a reliable, cycle-transcending long-term logic.

3. Narrative Revolution: When Web3 Begins to Solve Real Problems

Macroeconomic headwinds have forced market participants to shift from pure speculation to exploring projects' intrinsic value. The core focus of this cycle is no longer baseless "meme coins", but innovative narratives attempting to solve real-world problems:

• AI + Crypto: Combining AI's computational power with blockchain's incentive mechanisms and data ownership to create entirely new decentralized intelligent applications.
• Real World Assets (RWA) Tokenization: Putting real-world assets like real estate, bonds, and art on-chain, releasing their liquidity and breaking down barriers between traditional and digital finance.
• Decentralized Physical Infrastructure Networks (DePIN): Using token incentives to enable global users to collectively build and operate physical world infrastructure networks, such as 5G base stations and sensor networks.

The rise of these narratives marks a fundamental transformation from "selling air" to "investing in value". Crypto venture capital giant a16z crypto emphasized in its annual report the potential of "AI+Crypto" as the core innovation engine for the next round. For retail investors, this means greatly increased opportunities to discover value through in-depth research, where knowledge and understanding, for the first time, become more important than pure courage and luck.

III. New Cycle Survival Rules: Patiently Positioning Between the Finale and Prelude

We are at a crossroads of eras. The Federal Reserve's "hawkish finale" is unfolding, while the loose monetary prelude has yet to begin. For retail investors, understanding and adapting to new rules is key to crossing cycles and seizing golden opportunities.

1. Fundamental Transformation of Investment Paradigm

• From Chasing Trends to Value Investing: Abandon the fantasy of finding the "next 100x coin", and turn to researching project fundamentals, understanding its technology, team, economic model, and track landscape.
• From Short-term Trading to Long-term Holding: In a "value bull" market, true returns belong to investors who can identify core assets and hold through volatility, not frequent traders.
• Build a Differentiated Investment Portfolio: In the new cycle, different assets' roles will become clearer. BTC as the "digital gold" recognized by institutions is the portfolio's ballast; ETH, with its powerful ecosystem and ETF expectations, is a core asset with both value storage and productive properties; while high-growth Altcoins should be "rocket boosters" with small positions based on deep research, focusing on frontier tracks like AI and DePIN with real potential.

2. Maintain Patience and Prepare in Advance

DataTrek's research reveals an interesting phenomenon: in the last 12 months of the past three Fed chairs' terms, even with rates maintained at high levels, the S&P 500 averaged a 16% increase. This indicates that once the market believes the tightening cycle has ended, risk appetite may warm up even before rate cuts occur.

Such a "front-running" market scenario could also emerge in the crypto market. While the market's focus remains on short-term speculation about "when rates will be cut", true sages have already begun considering which assets and tracks will occupy the most advantageous positions in the future feast driven by macroeconomic tailwinds and industry cycles.

Conclusion

This crypto cycle is undoubtedly an ultimate test of retail investors' cognition and mentality. The era of easily profiting through courage and luck has passed, and a "value bull" era requiring deep research, independent thinking, and long-term patience has arrived. This is precisely its "difficulty".

However, it is in this era that institutional funds are flowing in at unprecedented scales, providing a solid market bottom; the value logic of core assets becomes increasingly clear; and truly value-creating applications begin to take root. For retail investors willing to learn, embrace change, and view investment as a cognitive realization journey, this is undoubtedly a "golden age" where they can compete alongside top minds and share the industry's long-term growth dividends. History does not simply repeat, but it is surprisingly similar. Between the finale and prelude, patience and foresight will be the only path to success.