Mastering Market Rotation: Reviewing the Fund Transfer Between SOL and AVAX

Author: Mercury

Compiled by: DeepTechFlow

Market Rotation: An Opportunity for Wealth Enhancement

In any market, especially the encryption market, rotation is a rare opportunity. It allows you to transfer profits from strong assets to underperforming assets, thus achieving compound interest rise of wealth.

However, the key to success lies in understanding the concept of 'relative strength'. Only when you have gained enough profit in strong assets can you have the capital to rotate. This is also the core of this article:

When the market is in a highly prosperous stage, many Tokens perform well (such as now), and the rotation selection in this situation may be dazzling.

But this is actually a good thing.

Because there are more Tokens worth following in the market at this time;

And the "attraction" of these Tokens will become more prominent.

Taking $SOL and $AVAX as examples

We can observe this rotation phenomenon through the performance of $SOL and $AVAX.

When SOL broke out of an 8-month consolidation range, AVAX has not even made a higher high.

After SOL broke out of the range, it slowly pumped 15%. Meanwhile, AVAX surged by 45% during the same period.

Subsequently, both entered a consolidation phase after reaching a local peak. During this period, SOL once again led the market, pumping 30% and hitting a new all-time high (ATH).

When SOL hit a new high (and potentially formed a local top unknown to us), AVAX formed a higher low and subsequently pumped 45%.

Now, as AVAX hits new highs again, SOL has pulled back to the trend support level in the higher time frame (HTF).

Rotating 'ping pong ball effect'

This phenomenon is like ping-pong, switching back and forth between two assets:

One asset is pumping strongly, while the other is stagnant;

Sometimes they will pump together mildly;

Sometimes they consolidate together.

But those eye-catching large Fluctuations - which make you start to follow and make social media hotly discuss the Fluctuation of a certain Token - often occur when another Token is stagnant or pullback.

Market attention economy

For those who have limited understanding of market dynamics or have not established a clear trading system and strategy foundation, the changes in the market may seem overwhelming.

You may encounter a situation where you sell Position at a local low point in AVAX and buy SOL instead, but then SOL experiences a pullback while AVAX starts to rise sharply, or vice versa.

In trading, patience often brings rewards. If you can find a suitable Position at the low point of the high time frame (HTFs), you should try to avoid frequent rotation as much as possible.

Simply put, the market transferring funds from one zone or token to another does not mean that you need to follow suit.

In fact, few people can successfully capture all the important pump trends of SOL and transfer all funds to AVAX at the right time to maximize profits. This kind of 'perfectionism' has rarely worked in trading.

Instead of pursuing the ultimate, it is better to follow both at the same time. From the market background, SOL and AVAX are both seen as performing well in high time frames.

For example, SOL is breaking out of an 8-month long consolidation range and is expected to continue the upward trend, entering the price discovery phase.

And AVAX just broke a 6-month downtrend a few weeks ago, and recently successfully broke a monthly high point in the past few days.

In general, there is no absolute right or wrong between the two. Perhaps, when SOL pulls back to the trend support level of the higher time frame (see the first picture), AVAX is approaching the resistance level of $55.

Alternatively, when SOL continues to pump after testing support in the next few days or weeks, AVAX may pullback from its resistance level.

In this case, the profit you gain on a Token can be used as capital to find new opportunities or increase the position in another Token - this is the actual meaning of 'rotation' in similar scenarios.

The key is that both of these have shown relative strength compared to the overall market, while much of the market is still in a downward trend or has no obvious Fluctuation.

How many Tokens are currently returning to multi-month ranges or breaking trends in high time frames? Although there are indeed dozens of them, it is still far from the stage of "making money by buying blindly".

Therefore, instead of excessively following short-term minor rotations, it is better to patiently wait for the opportunity to get on board for both, or to use minor rotations to rebalance Position at key turning points.

Finally, it should be noted that this is just a very small rotating case.

When we discuss rotation, different understandings of this concept may arise due to different time frames for each individual.

However, whether it is large-scale rotation or small-scale rotation, the core logic is the same, only the scope and degree of influence are different.

I may write a second part about rotation in the future, but for today, I'm done - I'm tired.

I hope this article is helpful to you.