Recently, I came across a Q1 market review, and the overall crypto market situation is indeed quite grim. Bitcoin has fallen from $93,000 at the start of the year to $63,000, a drawdown of over 38%; altcoins have suffered a broad-based plunge of 60–80%. This isn’t just short-term volatility—what lies behind it are deeper structural problems.

First, let’s talk about the macro environment. Geopolitical conflicts, trade wars, and the Federal Reserve’s policy reversals all stack up to form a perfect storm. In particular, the Fed’s stance has shifted: early in the year, the market expected 2 rate cuts, but by March’s fedwatch dot-plot, rate-cut expectations were compressed to nearly zero, and even the possibility of rate hikes began to be discussed. The new Federal Reserve chair nominee is also strongly hawkish, arguing that balance-sheet reduction should come before rate cuts—this is absolutely not good news for risk assets.

What’s most interesting is that people’s perception of Bitcoin’s “identity” is changing. Previously, everyone said Bitcoin is “digital gold,” but the actual data contradicts that. In Q1, gold hit a historical high of $5,300, while Bitcoin, over the same period, was falling. Even more painfully, Bitcoin’s correlation with the NASDAQ is as high as 0.87, but its correlation with gold is almost zero. In other words, when the market is panicking, Bitcoin behaves more like a high-risk asset rather than a safe-haven tool.

The institutionalization brought by ETFs really has changed the rules of the game, but it has also exposed problems. The overall unrealized loss on the Bitcoin ETF is about 23%; the average cost basis of holders is around $90,200, yet they can only watch their losses. What’s even more troublesome is that these ETF funds flow to Bitcoin almost 100%. The altcoin market receives no overflow effect—if anything, it has been further pushed to the margins.

Next, let’s look at the AI direction. Over the past year, the cost of AI large models has dropped by 80%, and technological iteration is indeed fast. But what about the narrative of Crypto+AI? To put it bluntly, it’s still mostly stuck in the hype stage. Aside from decentralized GPU computing power networks that generate some real income, most other directions are basically empty promises. Ironically, AI concept stocks in the US stock market last year rose by far more than crypto AI tokens, as capital was siphoned into the traditional market.

The altcoin market’s predicament goes even deeper. All new sources of capital (ETFs, DAT) are entirely locked in Bitcoin and blue-chip assets, leaving small- and mid-cap tokens ignored. The peak period for token unlocks is set to continue into Q2 and Q3; in an environment without new capital inflows, selling pressure will only keep getting heavier. After VC-funded projects go live, they generally break even—or rather, they go public at a loss. Investors are left stuck, and for some projects, they simply never get listed on exchanges.

Overall, the market has not yet cleared. The liquidity turning point will most likely continue to be delayed. The dual inflation pressure from tariffs and energy prices doesn’t look like it will ease in the short term. The geopolitical situation is also not optimistic. Even if the Mỹ-Iran conflict subsides in the short run, the political logic of an election year in the medium term means policy won’t loosen.

For current strategy, my recommendation is to focus on defense. Control your positions and leverage, and concentrate on the safe management and exit planning for existing holdings—don’t think about chasing the rebound. The market’s hopes for ETF expansion and AI×Crypto productization are difficult to realize in the short term. Protecting existing positions and preserving “ammunition” is the right choice right now. This market needs time to digest—it can’t be rushed.