As of around March 23 in the UTC+8 time zone, the situation in the Middle East remains tense, with the conflict extending beyond the benchmark expectations set by most institutions and traders at the beginning of the year. Coupled with the surging prices of crude oil, this creates a thicker layer of geopolitical uncertainty over global asset pricing. In this context, the cryptocurrency market, viewed as a "high beta risk asset", failed to transform automatically into a safe haven as some investors imagined. Instead, it has faced continuous liquidity withdrawal under the pressure of macroeconomic uncertainty and rising capital costs. On March 23, Yili Hua publicly proposed a strategy focused on "mainly risk aversion, only trading rebounds and not reversals," and specified that stop-losses had been triggered, opting to wait for clearer signals. This move quickly became a focal point of discussion in the Chinese cryptocurrency circle. The larger underlying issue is that since the "1011 incident," overall liquidity has been declining steadily, with shrinking trading volumes and diminishing depth. In a situation characterized by high leverage and low liquidity, a large number of middle-class investors have been concentratedly washed out, leading to a crypto market liquidation unfolding against the backdrop of war and capital retreat.

The Ongoing Conflict and Rising Oil Prices Shatter Expectations

The duration of the war in the Middle East has significantly exceeded the market's "short-lived conflict" expectations established at the end of last year and the beginning of this year. This extension of the conflict has disrupted the risk appetite reevaluation that had hoped to exchange time for space. The conflict has not eased within the established window; on the contrary, it has shown signs of fluctuating back and forth. Coupled with the recurring disruptions in regional security, institutions must increase the weight of "geopolitical tail events" in their risk models, systematically suppressing risk appetite. This uncertainty is no longer easily ignored background noise but has transformed into an explicit constraint within the asset allocation framework.

In this process, the continuous rise in oil prices has become one of the core channels suppressing global risk appetite. The increase in energy costs signifies stubborn inflation and further compresses the space for monetary authorities in various countries to maintain easing and interest rate cuts. For global assets reliant on dollar liquidity, this is not just pressure on the profit and loss statement, but also a valuation squeeze caused by rising discount rates. As a highly volatile and elastic risk asset, cryptocurrency faces dual pressures in such an environment: on one hand, macro uncertainty forces funds to reduce risk exposure; on the other hand, rising energy prices suppress the imagination of "easing expectations," making the key narrative of "liquidity surging again" difficult to hold up.

Under the dual constraints of escalating macro risk and rising energy prices, the positioning of crypto assets becomes increasingly awkward. The narrative that had been packaged as an "alternative safe haven tool under geopolitical conflict" over the past few years now struggles to align with real-world performance; price movements more reflect high sensitivity to dollar interest rates and liquidity expectations rather than independent pricing of the conflict itself. For those who still hope that "war would boost cryptocurrency prices," this mismatch is being ruthlessly adjusted by recurrent market fluctuations.

Liquidity Retreat: Middle-Class Investors Concentratedly Cleared Out

If the risk aversion discussions around March 23 are extended over a longer period, the timeline post-"1011 incident" serves as a key anchor point for understanding the current clearing pattern. As Yili Hua pointed out, since then, overall liquidity in the crypto industry has been slowly and continuously declining: the capital available for market making has decreased, the order book thickness of mainstream trading pairs has diminished, and the counterparties willing to absorb large orders have become increasingly scarce. Superficially, prices are oscillating at high levels with fluctuating sentiment, but underlying liquidity is gradually slipping away unnoticed.

With the liquidity retreat, market transactions and depth weakening have significantly amplified price volatility and liquidation risks. During periods of high liquidity, a sell-off of the same scale might only result in a few basis points of fluctuation, but now it can break through multiple price points and trigger a chain of liquidations. Especially in environments where derivative leverage is widely used, every contraction in market depth magnifies the cycle of “liquidation—rebound—subsequent sell-off” triggered by forced liquidations. Prices do not simply reflect supply and demand changes but are amplified and distorted by the trading structure itself.

In this process, those who are often concentratedly cleared out are ordinary investors represented by the middle class. They lack the long-term chips and capital flexibility of whales but attempt to leverage profits within a short time frame through high leverage, with significantly less emphasis on risk management and position control than professional institutions. When liquidity approaches exhaustion, their reliance on being able to "run at any time" is merely an illusion: stop-loss orders experience slippage at weak order books, and top-up chips struggle to arrive promptly when capital chains tighten, ultimately dragging them into repeated waves of concentrated forced liquidations amid the dual pressures of high leverage and low liquidity, making them the most evident "victims" of this retreat.

A Risk Aversion Approach of Only Trading Rebounds and Not Reversals

In such a macro and micro structure, Yili Hua's choice to prioritize risk aversion, control drawdowns, and strictly execute stop-losses reflects a trading philosophy that is closer to "survival first." In his statement on March 23, he viewed "the duration of the Middle Eastern war being longer than expected and the continuous rise of oil prices" as the core risk factor in the current environment. Based on this, he proactively reduced risk exposure, triggered stop-losses, and abandoned aggressive speculation on short-term trends, choosing to maintain a defensive stance until clearer turning point signals emerge.

The idea of "only trading rebounds and not reversals" is essentially a form of restraint in betting on trends. A rebound means conducting limited-risk trades by leveraging emotional and technical short-term repairs after excessive panic or runs; a reversal, however, requires a higher confidence level regarding substantial changes in the macro and funding environment. With the fires still burning in the Middle East, oil prices still fluctuating at high levels, and overall cryptocurrency liquidity retreating from its peak, hastily betting on a "complete trend reversal" does not present a favorable risk-reward ratio. By capturing rebounds only within controllable ranges and not continuously increasing positions based on the imagination of a "massive market," it essentially entails giving up a portion of potential profits in exchange for a more predictable maximum drawdown limit.

In the current environment, observing and waiting for the situation to become clearer, the significance of this approach in risk management is highlighted once again. For institutions and mature traders, remaining in cash or holding low positions is not "missing out on opportunities," but a consciously chosen state of positioning: before the variables related to war and oil prices are fully digested and the bottom of liquidity is confirmed, holding more chips for a future phase with greater confidence often proves more sustainable than stubbornly maintaining positions during periods of highest uncertainty. For ordinary investors, this notion of “choosing to earn less rather than risking more” may be more worthy of emulation than any tactical skills.

Emotional and Narrative Gaps: Media Intensifies Risk Aversion Signals

Around March 23, many Chinese cryptocurrency media outlets focused on reporting Yili Hua's risk aversion views, which rapidly elevated what was originally a discussion internal to the trading circle to a "public event." The dense retweets and interpretations from platforms such as Jinse Finance, BlockBeats, and Odaily Planet Daily made the narrative of the combination of "Middle Eastern war + rising oil prices + liquidity retreat" the explicit main line of discussion among communities and retail investors. This short-term media resonance, on one hand, increased the reach of information, but on the other hand, inevitably amplified market emotional volatility.

The propagation of the risk aversion narrative between communities and traders is not a simple one-to-ten, ten-to-hundred transmission. Each layer of retelling accumulates its own fears, anxieties, and positions. For participants who already hold high leverage and unstable profits, such collective reminders are often interpreted as "the wind has completely changed," triggering a wave of concentrated position reductions or even panic selling; for those who have already lowered their positions or are watching from the sidelines, it feels more like an endorsement of their prior defensive stance, further reinforcing the tendency of "not rushing to build large positions," creating an emotional synergy where "those with positions want to run, and those without don't dare to enter."

Under the same risk aversion narrative, the behavioral differences between mainstream funds and retail investors become particularly stark. Institutions and large funds can dynamically adjust exposure using more comprehensive Risk Dashboards within a unified macro framework, consciously reducing positions, hedging, or shifting duration without needing to flee hurriedly at a single event node; conversely, retail and small fund holders are more susceptible to making rhythmically imbalanced decisions under the continuous stimulation of media and community sentiments: they hesitate to reduce positions at high levels and, when they see "everyone talking about risk aversion," may slash right at the local bottoms, ultimately being ground down on both their chips and confidence amid volatility. The gap between this narrative and behavior causes the same information to produce entirely different gameplay experiences among people with varying capital sizes and capacity.

Reassessing Risks and Opportunities in the Shadow of War

Overall, the prolonged situation in the Middle East combined with rising oil prices, alongside the ongoing retreat of liquidity in the cryptocurrency sector since the "1011 incident," forms a backdrop of medium to long-term pressures on the crypto market. The geopolitical uncertainties brought by the fires, the constraints on inflation and interest rate paths due to rising energy prices, and the structural volatility amplified by declining depth and transaction volumes collectively undermine the logical consistency of "blindly investing in high beta assets." The current adjustment is difficult to categorize simply as an ordinary technical correction; rather, it resembles a systematic repricing of risk appetite and capital structure.

At this stage, investors need to develop a set of executable risk aversion principles and position management frameworks, rather than hoping for a single "positive news" moment to turn everything around. Lower leverage multiples, clearer max drawdown tolerance lines, and more decisive stop-loss execution are the infrastructures that ensure "surviving long enough" in times of high uncertainty. Simultaneously, through layered position management, completely separating "long-term chips" from "short-term speculative positions" also helps avoid emotionally driven decisions amid drastic fluctuations. Incorporating macro risk factors (geopolitical, oil prices, interest rate expectations) into one's investment framework instead of solely watching the order book and candlestick charts is becoming a consensus among more rational participants.

Looking ahead, when substantial signals of easing in the Middle Eastern situation and alleviating oil price pressures emerge, coupled with a marginal shift from "tight" to "loose" in global liquidity expectations, the recovery path for the cryptocurrency market is expected to genuinely open up. On one hand, the decrease in macro risk premiums will release valuation space for high volatility assets; on the other hand, as the liquidity level rises and depth improves, the currently exaggerated price volatility and liquidation chains will gradually converge, allowing the market the chance to transition from a purely "liquidation phase" to pricing a new round of narratives and applications. However, before such nodes truly arrive, figuring out how to hold the line between the shadows of war and liquidity retreat is a more pressing question than "how high can the next bull market rise."

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