From frenzy to rationality, the bull run has changed its style, but retail investors are still losing money?

Author: Luke, Mars Finance

Original Title: From "Water Buffalo" to "Value Bull", why are retail investors struggling tremendously?

For cryptocurrency investors who experienced the grand bull market of 2020-2021, the current market is undoubtedly confusing and torturous. It was a carnival era ignited by the global central banks' "money printing," with an overflow of liquidity, and everything rising together; it seemed that buying into any project with eyes closed could yield astonishing returns. However, those days are gone forever. Now, the global financial market hangs on a delicate balance: on one side are surprisingly strong U.S. economic data, and on the other side is the Federal Reserve's unwavering hawkish stance, with the historically high interest rate environment looming like a mountain over all risk assets.

This paradigm shift driven by the macro environment has made this round of the cryptocurrency cycle the "toughest era" for retail investors. The previous model of "liquidity-driven" and purely emotional speculation has become ineffective, replaced by a market that places more emphasis on intrinsic value, driven by clear narratives and fundamentals, known as the "value bull" market.

However, the other side of difficulty is precisely the opportunity. When the tide goes out, true value investors will usher in their "golden age." It is in such an environment that the compliance entry of institutions, the programmatic deflation of technology, and the real applications integrated with the real economy highlight their true, cyclical value. This article aims to deeply deconstruct this profound transformation and clarify why this era, which makes speculators feel challenged, is precisely the golden path paved for prepared investors.

1. The Most Difficult Era: When the Tide of "Massive Liquidity" Recedes

The difficulties of this round cycle stem from a fundamental reversal in macro monetary policy. Compared to the extremely friendly environment of the previous bull market characterized by "zero interest rates + unlimited quantitative easing," the current market faces the most severe macro headwinds in decades. In order to curb the most severe inflation in forty years, the Federal Reserve has initiated an unprecedented tightening cycle, which has brought double pressure to the crypto market and completely ended the old model of easy profits.

1. The Macro Data Dilemma: Why Interest Rate Cuts Are Still Far Off

The key to solving the current market dilemma is to understand why the Fed has been slow to let up on the end of its interest rate hikes. The answer lies in the recent macroeconomic data – which may seem "good" but turn out to be "bad news" for investors who are expecting easing.

Stubborn inflation and a hawkish dot plot: Although inflation has fallen from its peak, its stickiness far exceeds expectations. The latest data shows that the U.S. CPI year-on-year for May was slightly below expectations, but the core inflation rate remains stubbornly high at 2.8%.

There is still a significant gap from the Federal Reserve's 2% target. This stubbornness is directly reflected in the Federal Reserve's latest economic projections (SEP) and the closely watched "dot plot." After the June meeting, Federal Reserve officials drastically lowered their expectations for interest rate cuts, reducing the median number of cuts for the year from three to just one. This hawkish shift has heavily impacted market optimism. As Powell stated at the post-meeting press conference: "We need to see more good data to enhance our confidence that inflation is indeed moving toward 2%." In other words, the threshold for the Federal Reserve to cut rates has become very high.

A Strong Job Market: Meanwhile, the U.S. labor market continues to demonstrate remarkable resilience. The non-farm payroll report for May showed that 139,000 new jobs were added, exceeding market expectations, while the unemployment rate remained low at 4.2%. A strong job market implies that consumer spending is supported, which in turn can exert upward pressure on inflation, making the Federal Reserve more hesitant regarding interest rate cuts.

Powell's "Historical Script": As pointed out by Nicholas Colas, co-founder of DataTrek Research, current chair Powell is following the script of his predecessors, adopting a hawkish tone in the final stages of his term to solidify his historical legacy of successfully curbing inflation. This consideration of personal and institutional reputation means that unless there is a drastic downturn in economic data, any shift in policy will be extremely cautious and slow.

2. The "Attraction" of High Interest Rates: The "Blood Loss" Effect of Crypto Assets

This macro background has directly led to the difficult situation in the cryptocurrency market:

Liquidity Exhaustion: High interest rates mean a decrease in "hot money" in the market. For the crypto market, especially altcoins, which heavily rely on the influx of new funds to drive price increases, the tightening of liquidity is its most lethal blow. The once prevalent trend of "everything rising" has been replaced in this cycle by a structural market characterized by "sector rotation" or even "only a few hotspots."

Opportunity cost skyrockets: When investors can easily obtain over 5% risk-free returns from U.S. Treasury bonds, the opportunity cost of holding assets like Bitcoin, which do not generate cash flow and have extreme price volatility, sharply increases. This leads to a significant outflow of funds seeking stable returns from the crypto market, further exacerbating the market's "bleeding" effect.

For retail investors who are used to chasing hot trends in a flood of liquidity, this change in the environment is brutal. Strategies that lack in-depth research and rely solely on following the crowd for speculation are likely to suffer heavy losses in this cycle, which is the core reason for the "difficult" nature of this cycle.

2. The Golden Age: From Speculation to Value, the Emergence of New Opportunities

However, the other side of the crisis is the opportunity. The macro headwinds are like a stress test, squeezing out market bubbles and filtering out the core assets and narratives that truly have long-term value, thus opening an unprecedented golden era for prepared investors. The resilience of this cycle is precisely driven by several strong endogenous forces independent of macro monetary policy.

1. Golden Bridge: Spot ETF Initiates the Institutional Era

In early 2024, the U.S. Securities and Exchange Commission (SEC) historically approved the listing of a spot Bitcoin ETF. This is not just a product launch; it is a revolution in the crypto world. It opens a "golden gate" for trillions of dollars in traditional finance to invest in Bitcoin in a compliant and convenient manner.

Continuous fresh capital: By the second quarter of 2025, the total assets under management of just two ETFs, BlackRock's IBIT and Fidelity's FBTC, have exceeded hundreds of billions of dollars, with a sustained daily net inflow providing strong buying power to the market. This "new fresh capital" from Wall Street has largely offset the liquidity tightening caused by high interest rates.

The anchor of confidence: BlackRock CEO Larry Fink called the success of the Bitcoin ETF "a revolution in the capital markets" and stated that this is merely "the first step in asset tokenization." This endorsement from the world's largest asset management company has significantly boosted market confidence and provided retail investors with a clear signal to follow institutional footsteps and engage in long-term value investing.

2. The Faith in Code: Hardcore Support under the Halving Narrative

The fourth Bitcoin "halving" in April 2024 reduced its daily new supply from 900 to 450. This code-written, predictable supply deflation is what sets Bitcoin apart from all traditional financial assets. Against the backdrop of demand (especially from ETFs) remaining stable or even growing, the halving of supply provides a solid, mathematically underlying support for the price of Bitcoin. Historical data shows that within 12-18 months of the previous three halvings, the price of Bitcoin hit new all-time highs. For value investors, this is not a short-term hype gimmick, but a long-term logic that can be trusted through the cycle.

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

Macroeconomic headwinds force market participants to shift from pure speculation to exploring the intrinsic value of projects. The core focus of this cycle is no longer the baseless "Dogecoin" but rather those innovative narratives that aim to solve real-world problems:

• Artificial Intelligence (AI) + Crypto: Combining the computing power of AI with the incentive mechanisms and data ownership of blockchain to create entirely new decentralized intelligent applications.
• Real World Asset (RWA) Tokenization: Tokenizing real-world assets such as real estate, bonds, and artworks on the blockchain to release their liquidity and bridge the gap between traditional finance and digital finance.
• Decentralized Physical Infrastructure Network (DePIN): Utilizing token incentives to enable global users to collaboratively build and operate infrastructure networks in the physical world, such as 5G base stations, sensor networks, etc.

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

Three, New Cycle Survival Rules: Patiently Lay Out Between the Finale and the Prelude

We are at a crossroads of an era. The "hawkish finale" of the Federal Reserve is unfolding, while the prelude to easing has yet to be played. For retail investors, understanding and adapting to the new rules of the game is key to navigating the cycle and seizing golden opportunities.

1. Fundamental Shift in Investment Paradigms

• From chasing hot trends to value investing: abandon the fantasy of finding the "next hundredfold coin" and shift towards researching the fundamentals of projects, understanding their technology, team, economic model, and the competitive landscape they operate in.
• From short-term speculation to long-term holding: In a "value bull" market, true returns belong to those investors who can identify core assets and hold them long-term, traversing volatility, rather than to the frequent traders.
• Build a differentiated investment portfolio: In the new cycle, the roles of different assets will become more distinct.** Bitcoin (BTC)** is recognized by institutions as "digital gold" and serves as the "ballast" of the portfolio; Ethereum (ETH), with its strong ecosystem and ETF expectations, is a core asset that combines value storage and production material attributes; while high-growth altcoins should be the "rocket boosters" based on in-depth research and small position allocations, focusing on cutting-edge sectors with real potential such as AI and DePIN.

2. Be patient and plan ahead.

DataTrek's research reveals an interesting phenomenon: the S&P 500 has risen by an average of 16% over the last 12 months of the last three Fed chairs, even as interest rates remain high. This suggests that once the market is convinced that the tightening cycle is over, risk appetite may pick up sooner, even if a rate cut has not yet occurred.

This "front-running" market trend may also emerge in the cryptocurrency market. While the market's attention is generally focused on the short-term game of "when will interest rates be cut," the true wise ones have already begun to contemplate which assets and which sectors will occupy the most advantageous positions in this future feast driven by the resonance of macro tailwinds and industrial cycles when the prelude to easing is finally played.

Conclusion

This round of the crypto cycle is undoubtedly a maximum test of retail investors' understanding and mindset. The era of the "easy money bull" where one could profit easily with courage and luck has come to an end, and the era of the "value bull," which requires in-depth research, independent thinking, and long-term patience, has arrived. This is precisely its "difficult" aspect.

However, it is also in this era that institutional funds have poured in on an unprecedented scale, providing a solid bottom for the market; The value logic of core assets is becoming clearer; Applications that truly create value are starting to take root. For retail investors who are willing to learn, embrace change, and see investing as a cognitive monetization journey, this is undoubtedly a "golden age" where they can compete with the best minds and share the dividends of the industry's long-term growth. History does not simply repeat itself, but it is always strikingly similar. Between the finale and the overture, patience and foresight will be the only path to success.