From "point shaving bull" to "value bull": Why is this encryption cycle said to be the most difficult yet also the golden age for retail investors?

The entry of institutional funds, the Bitcoin Halving, and the rise of real applications have created opportunities for long-term investors.

Written by: Luke, Mars Finance

For crypto investors who experienced the spectacular bull market of 2020-2021, the current market is undoubtedly confusing and painful. It was an era of carnival ignited by the "big release" of central banks around the world, where liquidity was overflowing, everything was rising, and it seemed that buying any project with your eyes closed could reap amazing returns. However, those days are gone. Today, global financial markets are hanging over a delicate balance: with unexpectedly strong US economic data on one side and the Fed's unwavering hawkishness on the other, the historically high interest rate environment is like a mountain weighing on all risk assets.

The paradigm shift dominated by the macro environment has made this round of the crypto cycle the "most difficult era" for retail investors. The previous model of relying on liquidity-driven, purely emotional speculation, known as the "water cow" model, has become ineffective. Instead, we are now witnessing a "value bull" market that places greater emphasis on intrinsic value, driven by clear narratives and fundamentals.

However, the other side of difficulty is precisely the opportunity. When the tide goes out, 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 applications that combine with the real economy can highlight their true, cyclical value. This article aims to deeply deconstruct this profound transformation, explaining why this era, which makes speculators feel challenging, is precisely the golden path paved for prepared investors.

1. The Toughest Times: When the Tide of "Massive Liquidity" Withdraws

The difficulties of this cycle stem from the fundamental reversal of 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 is facing the most severe macro headwinds in decades. The Federal Reserve has initiated an unprecedented tightening cycle to curb the most severe inflation in forty years, which has brought dual pressure to the crypto market and completely ended the old model of easy profits.

1. The Macroeconomic Data Maze: Why Interest Rate Cuts Are Still Far Off

The key to overcoming the current market dilemma lies in understanding why the Federal Reserve has been hesitant to ease up at the end of interest rate hikes. The answer is hidden in the recent macroeconomic data—these seemingly "good" numbers have become "bad news" for investors hoping for easing.

Stubborn inflation and hawkish dot plot: Although inflation has retreated from its peak, its stickiness is far beyond 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%.

This is still significantly short of the Fed's 2% target. This stubbornness is directly reflected in the Fed's latest Economic Projections (SEP) and the closely watched "dot plot". After the June meeting, Fed officials sharply lowered their rate cut expectations, cutting the median number of rate cuts this year to just one, from the previous three. This hawkish shift has dealt a heavy blow to market optimism. As Powell said in his post-meeting press conference, "We need to see more good data to strengthen our confidence that inflation is continuing to move towards 2%." In other words, the Fed's rate cut threshold has become very high.

Strong Job Market: At the same time, the U.S. labor market continues to show remarkable resilience. The non-farm payroll report for May revealed that new jobs increased by 139,000, exceeding market expectations, while the unemployment rate remained low at 4.2%. A strong job market means consumer spending is supported, which in turn may bring 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 Chairman Powell is following the script of his predecessors, adopting a hawkish tone in the final phase 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 sharp decline in economic data, any shift in policy will be extremely cautious and slow.

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

This macro backdrop directly leads to the difficult situation of the cryptocurrency market:

Liquidity Drying Up: High interest rates mean a reduction in "hot money" in the market. For the cryptocurrency market, which relies heavily on new funds getting on board to drive up prices, especially altcoins, the tightening of liquidity is its most fatal blow. The once prevalent "everything rises" phenomenon has been replaced in this cycle by a structural market of "sector rotation" and 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 volatile prices, 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 used to chasing hot spots in an environment of abundant liquidity, this change in the environment is brutal. The strategy of lacking in-depth research and merely following the crowd is likely to suffer severe losses in this cycle, which is at the heart of the "difficulty" of this cycle.

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

However, the other side of the crisis is an opportunity. The macro headwinds are like a stress test, squeezing out the market's 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 that are independent of macro monetary policy.

1. Golden Bridge: Spot ETF Opens the Year of Institutionalization

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.

Endless Fresh Water: As of the second quarter of 2025, the total assets under management of just BlackRock's IBIT and Fidelity's FBTC ETFs have surpassed hundreds of billions of dollars, with a continuous daily net inflow providing strong purchasing power to the market. This "new fresh water" from Wall Street has largely offset the liquidity tightening caused by high interest rates.

The anchor of confidence: BlackRock CEO Larry Fink referred to the success of the Bitcoin ETF as "a revolution in the capital markets" and stated that it is just "the first step in asset tokenization." This endorsement from the world's largest asset management company has greatly boosted market confidence and provided retail investors with a clear signal to follow institutional steps for long-term value investment.

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

The fourth "Halving" of Bitcoin in April 2024 will reduce its daily new supply from 900 coins to 450 coins. This code-defined, predictable supply contraction is the unique charm that differentiates Bitcoin from all traditional financial assets. Against the backdrop of stable or even growing demand (especially from ETFs), the supply Halving provides a solid mathematical underpinning for Bitcoin's price. Historical data shows that in the 12-18 months following the first three Halvings, Bitcoin's price reached all-time highs. For value investors, this is not a short-term speculative gimmick, but a trustworthy long-term logic that transcends cycles.

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

Macroeconomic headwinds force market participants to shift from mere speculation to digging into the intrinsic value of projects. The core hotspots of this cycle are no longer the baseless "Dogecoins," but rather those innovative narratives that attempt to address real-world problems:

• Artificial Intelligence (AI) + Crypto: Combining the computational 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, unlocking their liquidity, and bridging 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." Crypto venture capital giant a16z Crypto highlighted 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 opportunity to identify value through in-depth research has greatly increased, with knowledge and understanding becoming more important than mere boldness and luck in this market for the first time.

3. Survival Rules of the New Cycle: Patiently Layout Between the Final Chapter and the Overture

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

1. Fundamental shift in investment paradigms

• From chasing trends to value investing: abandon the illusion 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 are 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, navigating through volatility, rather than frequent traders.
• Build a differentiated investment portfolio: In the new cycle, the roles of different assets will become more distinct.** Bitcoin (BTC)** as "digital gold" recognized by institutions, is 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 tracks with real potential such as AI and DePIN.

2. Be patient and plan ahead.

DataTrek's research reveals an interesting phenomenon: in the last 12 months of the terms of the past three Federal Reserve Chairs, the S&P 500 index averaged a 16% increase despite interest rates remaining high. This indicates that once the market is convinced that the tightening cycle has ended, risk appetite may start to recover even before interest rate cuts occur.

This "early bird" market trend may also appear 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 think about 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 overture of easing finally plays.

Conclusion

This round of the crypto cycle is undoubtedly an extreme test of the understanding and mindset of retail investors. The era of "easy profits" through courage and luck, the "Cash Cow" era, has come to an end, and a "Value Bull" era that requires deep research, independent thinking, and long-term patience has arrived. This is precisely where its "difficulty" lies.

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; and applications that can truly create value have begun to take root. For retail investors who are willing to learn, embrace change, and view investment as a journey of cognitive realization, this is undoubtedly a "golden era" where they can compete on the same stage as the top minds and share in the long-term growth dividends of the industry. History does not simply repeat itself, but is always remarkably similar. Between the final chapter and the prelude, patience and foresight will be the only path to success.