The "True and False Prosperity" in Short Covering Markets

Many veteran traders are naturally cautious about rebounds because they've seen too many "pump and dump" schemes. This is especially true in the Bitcoin market—high volatility means opportunities but also traps. A typical feature of this rebound is the rapid shift of derivatives market funding rates to positive, yet it hasn't become overheated. This indicates market sentiment is warming but not yet crazy.

The difference between a true and false rebound lies in sustainability. Short-term rallies rely on short sellers covering their positions, medium-term rises depend on increased capital inflow, and long-term bull markets are driven by narratives. Currently, it feels more like a transition from the first to the second phase, but a consensus has not yet formed. Once consensus is reached, it often marks the beginning of increased volatility.

Interestingly, each rebound tends to generate new "belief logic": some say it's due to ETF expectations, others cite halving cycles, and some believe it's institutional re-entry. In reality, these reasons are often post-hoc explanations. Prices move first, logic follows later—that's the norm in financial markets. #Celebrating New Year at Gate Square

For ordinary investors, rather than predicting peaks, it's better to manage positions. The most common mistake during rebounds is chasing high immediately after being squeezed out. The market tends to punish two types of people: those who refuse to believe in bad news and those who are overly confident.

A truly mature strategy is to treat rebounds as observation windows—watch the intentions of major players, monitor sector rotations, and see if the market is forming positive feedback. If copycat projects start rallying and trading volumes increase in steps, then the market level may be upgrading.

In the crypto world, rebounds are never a gift but a test.