Hello everyone, I am Lao Wang, who tends to observe the market from a macro perspective. I personally engage in diversified asset allocation, and cryptocurrency is part of that. All opinions in this article are personal notes for learning and reflection, and should not be considered investment advice. As we often say, what is free is often the most expensive, so please make independent decisions.
Do you feel that the market has been quite 'twisted' lately? One moment we celebrate good inflation data, and the next we plunge due to strong employment figures. The news is complex, with both bulls and bears suffering; just focusing on the price charts and project news makes me feel like a firefighter, always a step behind the market.
Today, I want to share with you a powerful thinking tool from the traditional financial world that I have validated countless times - the Economic Cycle Clock. It can help you understand our current 'financial season' like checking the weather forecast, allowing you to adjust your cryptocurrency investment strategy rather than blindly chasing price fluctuations.
Part One: Why Should Crypto Traders Understand 'Weather'?
The cryptocurrency market is no longer an isolated paradise. Its ups and downs, especially for core assets like Bitcoin, are closely linked to global liquidity (simply understood as the amount of money in the market) and risk appetite. And both of these are precisely determined by the Federal Reserve's interest rate hikes and cuts, as well as the warmth or coldness of the global economy (macro).
You can think of the macro environment as the tides of the ocean, while individual cryptocurrencies are just the boats on the sea. The direction of the tide (macro liquidity) determines whether all boats are floating up or sinking down. Sailing against the tide, no matter how good the technique, will tire you out.
Part Two: A Chart to Understand Where We Are - Economic Cycle Clock
This 'clock' divides the economic cycle into four phases, each with a dominant asset class. I simplified it and correlated it with the cryptocurrency market, making it easy to understand:
Recovery Period (Spring):
Macroeconomic Characteristics: Policies begin to loosen, interest rates are low, and the economy is climbing out of the bottom.
Traditional Asset Performance: Stocks are starting to rise, and bonds are also performing well.
Cryptocurrency Market Mapping: Bitcoin initiates the rally as it is seen as 'digital gold' and a liquidity-sensitive risk asset. Market sentiment shifts from despair to hope, but there are still lingering concerns, and altcoins are relatively quiet. In this phase, holding BTC and ETH is crucial.
Overheating Period (Summer):
Macroeconomic Characteristics: The economy is booming, inflation is rising, and the central bank may be preparing to tighten (raise interest rates).
Traditional Asset Performance: Commodities (oil, copper) surge, stocks reach their peaks, and bonds decline.
Cryptocurrency Market Mapping: The market enters a full-blown FOMO (Fear of Missing Out). Funds flood into high-risk assets, and the altcoin season arrives! Various narratives (AI, DeFi, blockchain games) are being hyped, with dark horses emerging frequently. At Binance, you'll find Launchpool and new coin mining projects exceptionally popular, with numerous participants. In this phase, you can moderately chase strong leaders in trending sectors while controlling your positions.
Stagflation Period (Autumn):
Macroeconomic Characteristics: Growth stagnates, but inflation remains high, and the central bank is forced to continue tightening, making money increasingly expensive.
Traditional Asset Performance: Cash is king, and most assets are declining.
Cryptocurrency Market Mapping: This is the most damaging phase. Liquidity tightens, and the game of passing the buck cannot continue. Bitcoin and Ethereum lead the decline, while altcoins face significant losses. The market is filled with pessimism and panic. In this phase, the primary task is to reduce positions, hold stablecoins, or use Binance's simple financial tools (such as savings or fixed-term products) to earn basic returns and preserve strength.
Recession Period (Winter):
Macroeconomic Characteristics: Economic contraction, declining inflation, central banks stop raising interest rates, and even discuss lowering them.
Traditional Asset Performance: High-quality government bonds and other safe-haven assets are in high demand, while the stock market seeks a bottom.
Cryptocurrency Market Mapping: The market is extremely cold, but it is also a golden period for sowing seeds. Bitcoin may decline slowly or fluctuate to build a bottom, but the market begins to anticipate the next round of liquidity. True believers and smart money start to dollar-cost average core assets. This phase requires great patience, formulating a plan for gradual investment, and picking up those truly fundamentally sound 'bargains.'
Part Three: Practical Reflections Combined with the Binance Ecosystem
Understanding the cycle allows us to use trading tools more intelligently. For example:
In periods of overheating, you can participate more actively in Binance Launchpad and Launchpool, but be sure to set strict take-profit and stop-loss orders.
During stagflation and recession periods, rather than frequent trading, it is better to deeply study the reports from the Binance Research Institute to filter potential sectors for the next cycle. Alternatively, focus on stable return products in Binance's financial sector.
Always observe the funding rates of Binance trading pairs and the spot/futures price differences of mainstream coins, as these can help validate whether the current market is experiencing the frenzy of 'summer' or the cold of 'winter'.
To summarize:
Stop being obsessed with 15-minute candlesticks. Look up at the sky (macroeconomic cycle) and down at your feet (specific operations). What you need to do now is determine where we are likely positioned on the 'clock', and then adopt the corresponding asset allocation strategy. This won't allow you to perfectly time the market, but it can greatly increase your investment success rate and avoid the embarrassment of wearing a cotton coat in summer and a short sleeve in winter.
Based on the market sentiment, news direction, and asset performance you perceive, which quadrant do you think we are currently in on the economic cycle 'clock'? Is it the end of summer, or have you already felt the chill of autumn? Feel free to share your thoughts in the comments, and let's 'diagnose' together!
