From Speculation to Value: The Transformation Challenges and Opportunities in the Crypto Market

For crypto investors who experienced the bull market of 2020-2021, the current market conditions are confusing and challenging. The previous era of frenzy driven by global liquidity excess has come to an end, and now the global financial markets are at a delicate balance point. On one hand, there is unexpectedly strong U.S. economic data, while on the other hand, there is a steadfast hawkish monetary policy, with a high interest rate environment pressing down on risk assets like a mountain.

This paradigm shift dominated by the macro environment has made the current crypto cycle a significant challenge for retail investors. The previous model relying on liquidity-driven and purely emotional speculation has become ineffective, replaced by a "value bull" market that places greater emphasis on intrinsic value, driven by clear narratives and fundamentals.

However, the other side of the challenge is precisely the opportunity. When the bubble bursts, genuine value investors will usher in their "golden age." In such an environment, the entry of regulatory agencies, the programmed deflation of technology, and the real applications that integrate with the real economy can highlight their value across cycles. This article will delve into this transition and explain why this era, which is difficult for speculators, has paved the way for opportunities for prepared investors.

1. Market Dilemma Under Macro Headwinds

The difficulties of this cycle stem from a fundamental reversal of macro monetary policy. Compared to the extremely loose environment of the previous bull market, the current market faces the most severe macro headwinds in decades. In order to curb severe inflation, the Federal Reserve has initiated an unprecedented tightening cycle, which has brought dual pressure to the crypto market and ended the old model of easy profits.

1. Macro Data Maze: Interest Rate Cuts Are Far Off

The key to breaking the current market dilemma lies in understanding why the Federal Reserve has been reluctant to loosen monetary policy. Recent macroeconomic data appears to be "good," but has become "bad news" for investors hoping for easing.

Despite inflation having fallen from its peak, its stickiness is far beyond expectations. The latest data shows that the core inflation rate in the U.S. remained high at 2.8% in May, significantly distant from the Federal Reserve's target of 2%. This stubbornness is directly reflected in the Fed's latest economic forecasts and "dot plot". After the June monetary policy meeting, Fed officials sharply downgraded their expectations for interest rate cuts, reducing the median number of cuts for the year from three to one. This hawkish shift has severely impacted market optimism.

At the same time, the U.S. labor market continues to show remarkable resilience. The number of new jobs added in May exceeded expectations, and the unemployment rate remains low. A strong job market means consumer spending is supported, which in turn puts upward pressure on inflation, making the Federal Reserve more cautious about interest rate cuts.

2. The "attraction" of high interest rates: the "bleeding" effect of encryption assets

This macro background has directly led to the difficult situation of the crypto market:

Liquidity Drying Up: High interest rates mean that "hot money" in the market is decreasing. For the crypto market, especially small-cap tokens that heavily rely on new funds to drive prices up, tightening liquidity is a fatal blow. The once prevalent phenomenon of "everything rising" has been replaced in this cycle by a structural market trend characterized by "sector rotation" or even "only a few hotspots."

Opportunity cost surges: When investors can easily obtain high returns from low-risk assets, the opportunity cost of holding assets like Bitcoin, which do not generate cash flow and exhibit extreme price volatility, sharply increases. This has led 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 accustomed to chasing hot trends in an environment of abundant liquidity, this change in circumstances is brutal. The lack of in-depth research and the strategy of simply following the hype can easily suffer heavy losses in this cycle, which is precisely the core of the "difficulty" in this cycle.

2. The Emergence of New Opportunities: From Speculation to Value

However, the other side of the crisis is an opportunity. Macroeconomic headwinds are like a stress test, squeezing out market bubbles and filtering out 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. The spot ETF marks the institutionalization of the first year.

At the beginning of 2024, U.S. regulators approved the listing of a spot Bitcoin ETF. This is not just a product launch, but a revolution in the crypto world. It opens a "golden door" for trillions of dollars in traditional finance to invest in Bitcoin compliantly and conveniently.

By the second quarter of 2025, the total assets managed by major ETF products have surpassed hundreds of billions of dollars, with a sustained daily net inflow providing strong purchasing power to the market. This "new lifeblood" from traditional finance has largely offset the liquidity tightening caused by high interest rates.

The active participation of large asset management companies has greatly boosted market confidence and provided retail investors with a clear signal to follow the institutions' lead and engage in long-term value investing.

2. Hardcore support under the halving narrative

The fourth "halving" of Bitcoin in April 2024 will reduce its daily new supply from 900 to 450 coins. This code-defined and predictable supply deflation is the unique charm that distinguishes Bitcoin from all traditional financial assets. Against the backdrop of stable or even growing demand (especially from ETFs), the halving of supply provides a solid, mathematically grounded support for Bitcoin's price.

Historical data shows that in the 12 to 18 months following the first three halvings, Bitcoin prices reached all-time highs. For value investors, this is not just a short-term speculative gimmick, but a reliable, long-term logic that withstands cycles.

3. When Web3 starts to solve real problems

Macroeconomic headwinds force market participants to shift from pure speculation to exploring the intrinsic value of projects. The core hotspots of this cycle are no longer baseless speculative tokens, but rather innovative narratives that attempt to solve real-world problems:

• Artificial Intelligence (AI) + encryption: Combining the computational power of AI with the incentive mechanisms and data ownership of blockchain to create entirely new decentralized intelligent applications.
• Tokenization of Real World Assets (RWA): Bringing real-world assets such as real estate, bonds, and artworks onto the blockchain to unlock 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 "hype" to "value creation." 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 in this market than mere boldness and luck.

III. The Survival Laws of the New Cycle: Patiently Layout Between the Final Chapter and the Prelude

We are at a crossroads of an era. The "final chapter" of tight monetary policies is being played out, while the prelude to easing has yet to be sounded. 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 illusion of looking for the "next hundredfold coin" and shift towards researching the fundamentals of projects, understanding their technology, team, economic model, and the competitive landscape they are in.
• From short-term speculation to long-term holding: In a "value bull" market, the real returns belong to those investors who can identify core assets and hold them for the long term, riding through the volatility, rather than to the frequent traders.
• Build a differentiated investment portfolio: In the new cycle, the roles of different assets will become clearer. Bitcoin, recognized by institutions as "digital gold," serves as the "ballast" of the portfolio; Ethereum, with its strong ecosystem and ETF expectations, is a core asset with both value storage and productive material attributes; while high-growth emerging projects should be the "rocket boosters" based on in-depth research and small position allocations, focusing on frontier tracks with real potential such as AI and DePIN.

2. Be patient and plan ahead.

Market research reveals an interesting phenomenon: during the last 12 months of the terms of the past few Federal Reserve chairmen, major stock indices have shown significant increases even when interest rates remained high. This suggests that once the market is convinced that the tightening cycle has ended, risk appetite may begin to warm up even before interest rate cuts occur.

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

Conclusion

This round of the crypto market cycle is undoubtedly a extreme test of investors' cognition and mentality. The era of "easy gains" through luck, known as the "liquidity bull" market, has come to an end. A "value bull" market that requires in-depth research, independent thinking, and long-term patience has arrived.

However, it is precisely in this era that institutional funds have poured in at an unprecedented scale, providing a solid bottom for the market; the value logic of core assets has become increasingly clear; applications that can truly create value are beginning to take root. For those investors willing to learn, embrace change, and view investment as a journey of cognitive monetization, this is undoubtedly a "golden era" where they can compete with top minds and share in the long-term growth dividends of the industry. History does not simply repeat itself, but it is always remarkably similar. Between the final chapter and the overture, patience and foresight will be the only path to success.