Ouyi Research Institute: How to survive the winter of the bear market? Survival guide for users with different risk preferences

Original Source: Ouyi Research Institute

No historical event exists in isolation, and is either subject to causality or association. Whether it is an economic crisis, a war crisis, or a political crisis, there is no exception.

—"Crisis: 1520-2021"

1/Crisis abounds, the bear market may have just begun

The total market value of cryptocurrencies fell below the one trillion dollar mark, The industry is in its darkest moment.

At the macro level, the Federal Reserve continued to raise interest rates. On the 14th of this month, it announced an interest rate hike of 75 basis points, the most since 1994. Zhao Wei, a senior researcher at Ouyi, pointed out that the Fed’s continuous interest rate hikes did not achieve the goal of curbing inflation before, so the actions will become more aggressive. The Fed also said it would continue to raise interest rates at the fastest rate in decades this year, a move that will further influence market trends.

Rising interest rates means capital outflows. For the encryption market that once rose against the background of the US dollar’s water release, it is now facing the problem of reduced liquidity caused by the “pumping” of the US dollar. In other words, the encryption market and other secondary markets need to digest the consequences of the decline in US stocks brought about by the CPI exceeding expectations.

At the micro level, the Luna crash, Celsius run, three arrows burst, the domino effect swept the encryption market, the high-leverage bubble generated by revolving lending was ruthlessly burst, the market is falling from a liquidity crisis to a liquidity depletion, and even It may evolve into a systemic collapse caused by the insolvency of a group of encrypted institutions.

Looking back at the market trend, it is obvious that the cryptocurrency market has started a downward trend since the beginning of 2022. This week is the 13th consecutive week of decline in the market, but the market sentiment is after the Luna crash in early May. Just fell into a full panic.

If the price drop is a signal of a bearish move, then the bankruptcy of the narrative means to a certain extent that it has officially entered a bearish position.

In view of the fact that the cryptocurrency market has never suffered such a large-scale deleveraging "movement", most industry opinion leaders are pessimistic about the market outlook. They generally believe that the bear market will continue until around the fourth Bitcoin halving, or even longer.

The conclusion is unknown, but on the whole, the current market environment is indeed not optimistic. Although ETH2.0 is expected to complete the merger and officially go online at the end of the year, it is still uncertain. Zhao Wei, a senior researcher at the Ouyi Research Institute, also suggested that users should wait and see, choose a stable investment strategy, and survive the bear market.

2/ How to survive the winter? Here is a survival guide (for reference only)

Yes, survive!

In a bear market, FUD sentiment is pervasive. It is easy for everyone to lose confidence and be more likely to be driven by fear to make wrong trading decisions, which is likely to exacerbate losses. Therefore, we advocate everyone to view the bear market scientifically.

First of all, the bear market is not terrible, even for some people, it is an opportunity. Smart investors can steadily accumulate assets in the bear market and win huge returns in the next bull market; secondly, for the vast majority of users , Keep an empty cup state, abandon the investment inertia of the bull market, reorganize your investment portfolio, and make a reasonable and long-term strategy in position management as much as possible.

The following uses risk preference as the standard to provide strategic reference for cryptocurrency investors with high/medium/low risk preference types.

l Low risk preference

If you are experiencing a bear market for the first time, or if you are a conservative investor with a large amount of funds, you can also Or a newcomer who is about to enter the market recently and lacks a comprehensive understanding of encrypted assets, so regular investment in mainstream blue-chip assets is undoubtedly the most suitable choice at present, with a fixed amount of principal for purchases every month until the arrival of the bull market.

However, the first step in this strategy is to select assets. Ideally, a large portion of the portfolio would be allocated to blue-chip assets that are likely to rise in the next bull market — such as BTC and ETH.

If you have no relevant operating experience before, there are some fixed investment products on the market to choose from.

Taking Ouyi's fixed investment product as an example, users only need to enter the PC or APP of OKX, select "Strategy Trading Mode" on the "Trade" page and select spot fixed investment; then confirm the fixed investment cycle, fixed investment time, You can create a spot fixed investment strategy by investing the amount in each period.

Currently, this product supports multi-currency pair combination fixed investment, with a maximum of 20 coins fixed investment together, which is more flexible; this product also supports all currencies that can be traded on the platform, without currency restrictions; users can choose multiple times The interval (daily/weekly/monthly) can also be selected at different fixed investment times of the day, and the period is free; users can also view the fixed investment income history curve, the average price and income of each currency fixed investment through the asset management interface; and Ouyi Fixed investment products have a high capital utilization rate, and do not occupy funds in advance, and can directly use the funds in the trading account.

l  medium risk appetite

If you have an understanding of the cryptocurrency cycle and have or are currently configuring more types of assets, then at this time Position management is particularly important. First of all, you need to reorganize your investment portfolio, divide the proportion of positions, pay attention to the plate rotation in the bear market, and choose financial products or repeated arbitrage strategies reasonably to earn profits (also applicable to coin hoarding users).

Financial management is easy to understand. It is essentially equivalent to earning interest by depositing coins. Investors earn passive income by holding encrypted assets. For investors with medium and low risk preferences who hold encrypted currencies and are idle One of the more convenient and more profitable ways.

Take Ouyi's Yubibao and locked-up coin-earning products as examples.

Yubibao is a coin-to-currency value-added product created by Ouyi that can deposit and withdraw at any time, calculate interest on an hourly basis, and support custom interest rates. After the user transfers assets to Yubibao, the system will judge whether the loan is successful every hour according to the lending rate set by the user. After the loan is successful, the hourly interest can be obtained.

Locking and earning coins refers to staking digital assets on the blockchain network and obtaining rewards based on the POS mechanism. In this mechanism, the user entrusts the currency to the node, and the node exercises the right to produce blocks, package transactions and other rights on the blockchain and obtain rewards. Users share the rewards obtained by nodes in proportion to the number of locked positions.

Arbitrage is also well understood, and the grid trading strategy is a typical representative. Investors can programmatically and intelligently realize buying low and selling high within the expected price range, and repeatedly arbitrage.

Ouyi's spot grid trading strategy has been launched for a long time. Investors can choose to create it intelligently or manually. Interested readers can experience it by themselves. In addition to spot grid trading strategies, it also includes arbitrage strategies related to contract grid trading that are suitable for investors with high risk appetite mentioned below.

l  high risk appetite

If you are a professional trader, or a quantitative fund user, or a senior player with a financial background, you can Choose options/futures contracts/contract grids, or relatively complex trading strategies such as futures and cash arbitrage within the scope of your own controllable risks.

For the above strategies, the tools provided by most CeFi institutions are relatively mature, but they are relatively scattered. Users may need to switch back and forth between multiple platforms. The tools provided by DeFi are highly innovative, but they are complex to operate and have problems such as poor liquidity.

In contrast, Ouyi's unified account can not only meet the needs of users with low and medium risk preferences, but also provide convenience for users with high risk preferences. Given that the unified account function allows one account to trade currency, leverage, There are five categories of delivery, perpetual, and options, so it is more friendly to users who have derivatives and derivatives arbitrage needs.

Ouyi Research Institute has previously done research on the high-yield arbitrage strategy of unified accounts, and discussed the core logic of the three strategies of futures and spot arbitrage (perpetual-leveraged arbitrage)/cross-margin contract arbitrage/currency arbitrage.

The core logic of spot futures arbitrage (perpetual-leveraged arbitrage) is that, given the difference between the funding rate of the perpetual contract and the fixed interest rate, there is an arbitrage space between the perpetual contract and the spot leveraged transaction. We can respectively Establish a position with the same position value and opposite position direction in currency leveraged trading and perpetual contract trading to realize arbitrage between floating interest rates and fixed interest rates.

For the perpetual-leverage arbitrage strategy, it is very mature at present, and this strategy can also be used in the sub-account system in the past, but the limitation is that in the sub-account mode, the leveraged trading account and the perpetual contract account It is separate, and the two accounts cannot share margin; similarly, the sub-account model cannot achieve profit and loss balance, and users have to reduce the leverage multiple to prevent liquidation, making the overall capital utilization efficiency of the sub-account model low, and the income is not high.

The core logic of cross-margin contract arbitrage is to use the difference in the funding rate between the USDT margin perpetual contract and the coin-based margin perpetual contract to carry out arbitrage. prepared by professional investors. Because the funding rate difference between the two perpetual contracts is usually not too large, it means that only professional users who have received a high fee discount can arbitrage more easily; in addition, because the funding rate difference is too small, high leverage must be used to obtain substantial profits.

The core logic of the currency arbitrage strategy is in the automatic currency loan mode of the cross-currency margin of the unified account. When the balance or equity of a certain currency is insufficient, but the overall dollar value is sufficient, the user can also oversell the currency and generate liabilities. This is essentially a currency-to-currency leveraged transaction under the classic account mode, and no interest will be generated within the interest-free amount. Since it is possible to borrow currency interest-free under the unified account, we can also construct a currency arbitrage strategy with higher returns.

Of course, the unified account is not limited to the above three arbitrage strategies, but also includes intertemporal arbitrage strategies under the grid trading method, Gamma dynamic hedging strategies, etc. Since it is too complicated, I will not go into details. Interested Users can study and research by themselves.

The Bear Market Survival Guide is written here, I hope it will be helpful to you. The granularity of the investment reference provided in this article according to the venture capital preference is relatively rough, and it cannot cover all crypto players. It is likely that you are a scientist or a chain Surfers, the way to survive is even more clear. The bear market is a cycle that breeds innovation. It can not only participate in construction, but also serve as seed users to experience innovation and preach for innovation.

Finally, I would like to share some experiences of the Ouyi Research Institute. In any case, I hope that everyone can maintain a scientific attitude towards the encryption market, but do good things and don't be affected by FUD and FOMO.

1/ Capital preservation first

2/ Good mentality management

3/Set trading discipline and strictly abide by it

4/Accumulate industry knowledge and establish systematic cognition

5/Find a circle that suits you and connect with like-minded people Partners "surf" in the encryption industry

6/ Mark Twain said: "History will not repeat itself, but It’s going to be the same rhythm.” Hopefully we’ll all see a new post-bear market landscape.

This article is from a contribution and does not represent the views of BlockBeats  

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