BKEX Institute Annual Strategy Report(2022–2023)Before a bull market, it needs to experience a sufficient change of hands of chips. Adequate cheap chips are the basis for the main force to have the will to pull up. Because it has sufficient funds and a clear plan, the main force only cares a little about the short-term cost during the chip collection stage. But retail investors are not. If the chips in hand appear to be hedged, it is easy to hand them over in a panic so that panic will accelerate the exchange of cheap chips. Naturally, it also accelerates the phase change of the market.
It is difficult to quantify how many chips have been collected by the main force. But market sentiment can be judged by the FGI (Panic & Greed Index). When the FGI is below 20, the market is in extreme panic. When it is greater than 80, it is in excessive greed.
Combined with historical data, from the comparison of FGI (yellow) and BTC price (blue) data, when the FGI is consistently at an absolute low (below 20 in complete terms, coordinates -0.8 to -1 in the chart), the market is prone to see a critical bottom. Whether it was the beginning of 2019, after the '312' event in 2020, or even after the '519' event in the bull market, the stage lows occurred after the FGI data turned into extreme panic. Shortly after that, a significant upward move was initiated.
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Switching to ETH would lead to a similar conclusion. FGI is always in extreme panic before the stage lows at the end of the crash and the big-level rallies appear. The price data is consistent with the logic of the previous article.
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The recent market is a bit different. FGI's extreme panic appeared in the May-July decline. And for the first time in history, it was in an absolute panic for two consecutive months. Both BTC and the total market cap of the crypto market hit new lows during the subsequent FTX bankruptcy. But FGI did not fall through 20 again in the process.
While it's not advisable to assume that history will always repeat itself, it's a warning. There may be another actual desperate drop before the 2023 bull market arrives.
Summary:
Combining economic fundamentals and inflation issues with the analysis of the subsequent rate hike policy, we can see that the economy is fine, and a recession is hard to come by. After the withdrawal of the Fed from the rate hike and the opening of the rate cut, a new round of bull market will be officially launched.
Combined with data analysis on the chain and public opinion, we can conclude that value tokens like BTC and ETH have more application scenarios and participants than before, even though the current prices are already higher than those in previous years. The whole crypto market is still upward, and the incremental potential is still great.
At the stage where the bear market has entered the end of the year-long plunge, and there was even a market-wide overshoot on November 10, the investment value of the market has become more obvious.
Only a high investment value is only expected in the long term. How the short-term market will go remains challenging to judge. For example, we did not see the main absorption action on BTC like before the last round of the bull market started, and the pattern on the FGI index is different from the history of seeing a big bottom. The potential risks cannot be ignored and must be guarded by proper risk control tools. For example, the intention of direct entry into the long term should be to reduce leverage to a level sufficient to withstand the impact of a significant fall, etc.
