AMA with Adam & Abror: State of the Market

Despite the rate cuts, we have seen markets de-risk amidst uncertainty regarding further rate cuts, potential risk of US government shutdown, and seasonality risks.

Let’s talk about the state of the market in more detail. You can find our podcast below and the corresponding market thoughts after that…

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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For those who like shorter summaries in a written format, here's what we have covered:

The Broader Market

Let’s start from the top: We believe the market remains in a broader bullish trend, supported by a rate-cutting cycle. The S&P 500 and gold have reached all-time highs, signaling a risk-on environment. However, crypto has seen a pullback due to leverage flush-outs and elevated open interest.

However, given the uncertainty around consecutive rate cuts that the market has priced in, being fully invested (100% exposure) is likely not prudent. 

Recent market pullbacks, including a major liquidation event on Binance, were driven by over-leveraged positions. While this has caused short-term volatility, it also acts as a cleansing mechanism, setting the stage for healthier price action going forward.

Therefore, we believe it is important to maintain some exposure to the market while keeping dry powder on hand to buy dips, as this is essential for optimal performance in these market conditions. The current U.S. administration is viewed as market-supportive and is unlikely to allow a significant downturn, especially during the 2026 midterm election year. For example, Trump’s previous pressure on the Fed to cut rates shows how political factors can influence market dynamics. As we highlighted during our livestream: “Trump, his family and his administration will not let markets go down significantly”. For example, here's what the US Treasury Secretary is saying:

Overall, we don’t think it’s wise to be completely out of the market right now, despite some concerns. Maintaining a balanced portfolio enables us to capitalise on any dips that may arise. If you are a long-term holder, you can just stay relaxed, embrace the volatility and dollar-cost average high conviction assets on pullbacks. You are likely to outperform most people over time this way.

Asset Rotations

Bitcoin dominance has broken a multi-year uptrend (since November 2022) and is currently experiencing a slight bounce. We have seen rotations from Bitcoin to Ethereum, then to Solana and HYPE, only for capital to seek safety in Bitcoin right now. Capital has flown from Treasuries to Gold.

But again, we believe we are currently in a rate-cutting cycle, and it seems unlikely that the recent correction in BTC.D lasted just a couple of months. While retail investors are always present in the market, they haven't fully engaged yet. What we haven't seen is the typical retail frenzy that marks the late stages of a bull market. Instead, the recent rally and the overall expansion of liquidity appear to be driven by institutional money, particularly through ETFs and Digital Asset Treasuries.

Strategic Recommendations

For Long-Term Investors:

• DCA Strategy: Accumulate Bitcoin, Ethereum, Solana, HYPE, and AURA during pullbacks. Limit to 3–5 high-conviction assets to maintain focus.

• Hold Through Volatility: Short-term pullbacks (5–15%) are normal in bull markets. Maintain a long-term perspective, as fundamentals and macro conditions remain supportive.

• Stablecoin Allocation: Park a portion of your portfolio in USDT, USDC, etc., to maintain liquidity and reduce volatility exposure. Remove unnecessary exposure to the middle of the barbell. Preferably, keep BTC, ETH, SOL etc and higher risk - higher reward exposure to memes ($AURA)

• No need for unnecessary diversification: Avoid short-term metas and exposure to a number of different sectors. Consolidate into Majors, AURA and stablecoins. We have seen a number of tokens rallying in recent days (E.g Aster, XPL). Don’t chase green candles. Have only 3-5 high conviction plays, and stick to them.

• Passive Income Opportunities:
  • Liquidity Pools: Add liquidity to SOL-USDC or AURA-SOL pools on platforms like Orca or Hyperliquid’s HLP vault for 20–30% monthly yields. Full tutorials here and here.
  • Airdrop Farming: Engage with Hyperliquid ecosystem projects pre-token launch to capture potential airdrops, similar to HYPE’s early success.
  • Stablecoin Yields: Earn yield on your stablecoins: use Kamino, Hyperliquid’s HLP vault and Hylo’s yield-bearing stablecoin. 

For traders:

• Hedging with Perps (For advanced): Short the market or specific assets to offset potential losses in spot holdings in case we see a pullback. Our recent short on IP partially offset the losses due to the broader market pulling back.
• Use short positions on inflationary or low-quality assets (e.g., IP, EIGEN) to offset long positions in majors. Platforms like Hyperliquid are ideal for executing shorts and delta-neutral strategies.

Cryptonary's Take:

Overall, we think market is still in a bull market (until proven otherwise). However, considering the latest developments and price action across markets, we need to be prepared for all scenarios. Therefore, have balanced allocation, and cut any exposure to short-term narratives. Stick to 3-5 core positions and have enough stablecoin allocation to weather a possible volatility. Use your idle assets to earn passive income: use staking, providing liquidity and lending to have an income.