Do not let the trauma of the bear market bring post-traumatic stress disorder (PTSD) and deprive you of the opportunity to make crazy profits in the bull market and altcoin season.
Author: VIKTOR
Translation: DeepTechFlow
I spent a considerable amount of time researching the last bull market, the different popular narratives at the time, maximizing profits through rotation, the best-performing tokens in 2021, and the logic behind their huge gains.
This new cycle will not be completely the same as the previous one, but we should remember many lessons, as history is similar, especially in the financial markets, where most prosperity comes from the way the human brain thinks, which will never change.
Let's get straight to the point.
General experiences of the bull market
New coins perform well, old coins perform poorly
A significant trend of the 2021 bull market was the poor performance of old coins, with almost no coins from the 2018 cycle performing well in 2021.
Ripple (XRP), Stellar Lumens (XLM), Bitcoin Cash (BCH), NEO, XEM, IOTA, EOS, Dash, Monero (XMR), Zcash (ZEC), and Tron (TRX) never reached their previous all-time highs (in USD terms) again, and since 2018, they have basically only declined relative to BTC.
Of course, apart from BTC and ETH, the only good performance among major old coins came from BNB, Cardano (ADA), Ethereum Classic (ETC), and of course, DOGE.
This is a CoinMarketCap ranking screenshot from December 2017. I strongly recommend you to check several dates of these historical snapshots to help you understand how the cryptocurrency market "rotates."
Most coins perform worse than BTC before the bull market truly begins
When we are in the middle of a bear market and think we are close to the bottom, it is obviously the best time to buy BTC and ETH and hold them until the next bull market.
But under the same logic, you may also be tempted to buy altcoins because they have a high beta value against BTC, so they should perform better. Even though this is true for some altcoins, it was not entirely the case in the last bull market.
Most altcoins did not perform as well as Bitcoin during the Bitcoin rally at the end of 2020, and it was not until early 2021 that they suddenly started to take off.
The good news is that by holding BTC and ETH until the start of the bull market, you did not really miss out on excess returns.
If history repeats itself, this is what we should expect: BTC (perhaps including ETH) should have a period of independent takeoff, while altcoins lag behind, BTC dominance increases, and then suddenly rotation begins, at which point altcoins start to soar.
But I don't think this is what has already happened or is about to happen: over the past few months, we have seen that $BTC and BTC dominance have risen at the same time, just like in 2020, but this time from June 2023 to now, we have seen many tokens outperforming BTC.
BTC dominance
My explanation is:
For long-term investors, the best time to buy $BTC (and $ETH, even though in hindsight, not touching ETH in 2023 was the best idea) was the bottom in November 2022, and the right time to buy the correct altcoins was around June 2023.
There is a lot of variation in the performance of altcoins: $ETH did not perform as well as $BTC in 2023, some old altcoins also did not perform as well as $BTC in the past few months, while the performance of certain altcoins was significantly better than the market.
Nevertheless, we have not yet seen the frenzy stage of altcoins, and I expect this to happen when BTC breaks its previous all-time high ($69,000).
Most gains are concentrated within a few months
Most of the gains of these cryptocurrencies are concentrated within a fairly short period of time. Almost all performance occurs within a few months, especially in altcoins.
For example, in the last bull market, it was from January 2021 to May, and then from August to November. The market was in a period of "only rising, not falling," and at this time, your new opponents are retail investors who have given up on cryptocurrencies for 3 years.
These are the key moments when you need to put 100% of your energy into the market. There is a famous GCR tweet that summarizes what you need to do during these periods:
Here are a few examples to make you realize how rapid and concentrated the rises are:
$CHZ: Increased 30 times in one month from February to March 2021
$BNB: Increased 8 times in 20 days in February 2021
$DOT: Increased 8 times in two months from January to February 2021
$SUSHI: Increased 6 times in one month in January 2021
$AAVE: Increased 6 times in one month in January 2021
$HOT: Increased 35 times in two months from February to March 2021
$JOE: Increased 60 times in two weeks in August 2021
Do not let the trauma of the bear market bring post-traumatic stress disorder (PTSD) and deprive you of the opportunity to make crazy profits in the bull market and altcoin season
If this is your first market cycle, you are likely to enter the market too late, causing your investment to soar in irrational valuations without timely profits, and then hovering back and forth in many gains. However, if you are reading this article, it is likely that you have already experienced the previous cycle and survived the particularly brutal bear market of 2022. In the bear market, you must be vigilant for every rise and be ready to short every altcoin when it starts to rise due to some catalyst. This behavior will be rewarded. But in the bull market, everything changes completely: the coins rise higher than you imagine. You must be prepared to profit from it.
Here are some examples of tokens that skyrocketed in a very short time in 2021, along with the very large valuations they reached:
In January 2021, $DOGE increased nearly 10 times in one day, when it was already a billion-dollar token
The market value of $THETA increased from $1 billion to $12 billion in 3 months
The market value of $RUNE increased from $200 million to nearly $5 billion in 5 months
$FIL once reached a market value close to $400 billion
$ICP launched with a market value of $250 billion
The market value of $AXS increased from $200 million to $10 billion in 5 months, with its market value peaking at $43 billion
The market value of $GALA reached $5.4 billion at its peak in 2021, while the project's market value was only $5 million at the beginning of the year
The market value of $TEL increased from $10 million to $30 billion (300 times) in 5 months
Evolution of the total market value of cryptocurrencies during the last bull market
Main narratives and best returns of the 2021 cycle:
DeFi 1.0:
DeFi became a new thing in cryptocurrencies in 2020, providing new use cases and being a fresh thing from scratch. DeFi was the focus of the market in the summer of 2020, which is why it was called "DeFi Summer," and we can describe it as the beginning of the bull market (or the pre-start).
Adding a Ponzinomics aspect to the whole thing, you have the secret to huge profits. The two biggest winners in DeFi with a strong foundation are $AAVE and $SNX. Their returns ranged from 500x to 1000x from bottom to top. We can also mention $SUSHI, which grew 30x between November 2020 and March 2021.
Alt L1
L1 trading is the most enduring trading in cryptocurrencies and one of the most valuable trades in the previous cycle: the main winners of this trade are $SOL, $LUNA, $AVAX, but also include $FTM, $ADA, $BNB, $EGLD.
The market has given Alt L1 a very high premium, which means that, on average, their value (market cap or FDV) is higher than other categories, such as applications. Once you know this, you know you have to engage in this narrative. Soon it became clear that this was one of the main themes of the 2021 bull market, as some of these coins were among the best performers from the start until the Terra-Luna crash in May 2022.
The lesson here is: once you understand what the main themes of the cycle are, just go with the flow. The second lesson is: Alt L1 trading will never disappear. This was a dominant theme in 2021, but in fact, it was the same in 2017, and it became so again in 2023-2024.
Alt L1 Ecosystem Script
In cryptocurrency, whenever a coin rises, traders look for tokens related to the rising coin, or logically should follow the rising token. That's why when an L1 network coin rises, people start looking for all the tokens in that network's "ecosystem" because these tokens have smaller market caps, so they are expected to rise more dramatically and act as the "beta" of the L1 coin.
Usually, the main ecosystem coins are the dominant decentralized exchange (DEX) of that network, and in the last cycle, some crazy gains were made here:
For example, BSC had a boom in the first 2 months of 2021, so $BNB started a massive rise from $40 to a peak of $700, and $CAKE, as the main DEX on BSC, basically rose 50x in a month. For some traders, $CAKE was their best trade of the entire 2021 bull market.
The second example is in the Avalanche ecosystem: like most coins, $AVAX had a strong start in early 2021, but had a big drop in May (-70%), and then in August 2021, it was one of the strongest recoveries. Naturally, people started looking for beta coins, and the Avalanche DEX coin $JOE rose 50x in two weeks. Pangolin ($PNG) is another main DEX on Avalanche, but its price "only" doubled at the same time.
In addition to DEX, you can also consider meme coins, currency markets, perpetual DEX, CDP (over-collateralized stablecoins), launch platforms. I think now in 2024, people are more inclined to "main meme coins on X chain" rather than "main dex on X chain".
Metaverse
On October 28, 2021, Facebook announced its rebranding as Meta, and the new company's focus is on "building the metaverse." This immediately sparked an extreme speculative frenzy in the cryptocurrency market: the metaverse frenzy began.
There are 3 coins that led this narrative: $SAND, $MANA, and $GALA. They all nearly 10x in a month, and all you had to do was buy them after Meta announced its plans, even though they had already risen 20% after the announcement.
At the time, the market was approaching an exuberant peak, and with Meta's announcement, traditional finance and real-world news followed, so it was a very strong narrative and lasted for about a month.
More importantly, the metaverse is closely related to gaming, and a major crypto game, $AXS, went completely crazy during the summer of 2021. Game + metaverse is another powerful catalyst, as people then started looking for the "next Axie Infinity".
The lesson here is: understand technological and real-world trends outside of crypto, because in a risk appetite environment, if a technological trend has some relation to crypto, it will definitely become a narrative in crypto, as we saw in this metaverse and gaming frenzy.
The most 2024 narrative that resembles the 2021 metaverse is AI: the launch of ChatGPT did not coincide with the bull market and the overall AI narrative in time, so there was no month-long full AI frenzy (unlike the metaverse frenzy), but AI coins performed very well during the bubble period from January to February 2023, which was the most risk appetite environment of the year, and then AI coins performed well again in October/November 2023, and now in February 2024.
I think many AI coins are mainly virtual software, but I don't want to overlook a narrative that is so strong in the tech world. Some of the craziest gains in this cycle will come from the AI sector.
Meme Coins
Meme coins were some of the best-performing coins in the last cycle. $DOGE started at a market cap of $600 million in early 2021. Over the next 5 months, thanks to strong promotion by Elon Musk, until its peak, the price of $DOGE rose 150x, reaching a huge market cap of $900 billion.
A few months later, there was a great rotation, and another doge-themed meme coin, $SHIB, reached a market cap of $40 billion, while its value in early 2021 was less than $5 million.
Many other meme coins reached crazy valuations: $SAFEMOON (reached $17 billion at its peak), $ELON (over $1 billion), $AKITA ($1.5 billion), $FLOKI ($3 billion).
Memes are sure to continue, and it is likely that some meme coins will be the best-performing coins in the new cycle. In cryptocurrency, what primarily drives prices is not fundamentals, but narratives and speculation, and meme coins take this to the extreme.
NFT
NFTs were a completely new category and narrative in the 2021 bull market (technically, it's not new, but it was new to the market), and it was where some of the craziest gains were made.
When we say "NFT," we mainly refer to PFP collections, and the first (and OG) craze was CryptoPunks, whose floor price jumped from 5 ETH in January 2021 to 20 ETH in March, and then rose again to 100 ETH during the summer! A year ago, in the summer of 2020, the floor price was only 1 ETH.
A large number of NFT PFP series have been launched, the most successful one, apart from CryptoPunks, is obviously Bored Apes, but we can also mention Pudgy Penguins, Art Blocks (not PFP series), Doodles, Cool Cats, and others.
Thoughts on the cycle: How to play narrative rotation to maximize profits?
Cryptocurrency trading is a game of rotating from one narrative to another, and while it's almost impossible to accurately capture all short-term rotations, we can remember some lessons. Some narratives remain strong throughout the entire bull market, such as L1 network trading, which never stops, but most trends last for about a month, which is the first thing to know. The main part of the rise usually happens within a few weeks to a month, and then fatigue sets in, and the market's attention shifts to other things. Of course, this is a very rough pattern, and some coins manage to perform well for several months, but usually, if people have been talking about something for a month in a row (think of the metaverse frenzy in November 2021), be aware that this trend may have exhausted itself.
As we go through a bull market, people tend to increase their risk. This means that the main narratives at the beginning of the bull market may have some strong fundamentals, but over time, traders will look for increasingly higher-risk, higher-return, and increasingly irrational things.
For example, in 2020-2021, $LINK (strong fundamentals) was the best performer in the bear market, then we had the DeFi Summer, introducing a new paradigm, which is DeFi (strong fundamentals), and then we had the rise of BTC, and in the first part of the bull market, some DeFi coins performed the best ($AAVE, $SNX, $RUNE, $UNI).
In the following months, the market became increasingly speculative, virtual items were overvalued to the tune of tens of billions of dollars in FDV (metaverse, gaming), and high-yield pure Ponzi economics were seen as the future of finance (Olympus DAO $OHM). At this point, when all these top signals appear in the market, you may seek to exit, or at least significantly reduce risk. Seeing a large number of crypto games (launched through launchpads) launched at absurd valuations (> $1 billion) without offering anything other than promises is a good sign that we are approaching the top. Of course, all of this should be taken with a grain of salt, as the crypto market is constantly becoming more degenerate (DeFi Summer was already Ponzi economics, new meme coins are constantly being launched and traded, etc.), and if you're looking, you can almost always find "top signals" in crypto.
If a coin performs best in a bear market, it is unlikely to perform better than in the entire bull market cycle. At least, that was the case in 2021, but it was a unique bull market because it was clearly divided into two parts (before May 2021 and after July 2021). Many coins that performed strongly in the bear market peaked around May 2021 or even earlier: $AAVE, $SNX, $RUNE, $THETA, $KSM, $SUSHI.
In the latter part of the bull market, look for new narratives (metaverse, NFT in 2021), and be prepared to accept increasingly irrational, new Ponzi economics and things with religious beliefs (detailed in the next section).
For huge rallies… and then signs of massive sell-offs
Cryptocurrency tends to amplify many human psychological biases and emotions, which are often catalysts for more extreme rallies and more extreme sell-offs. It seems particularly important to identify these two catalysts:
"Protagonists" and the worship of some crypto figures
The crypto market loves "protagonists," who are often worshipped and can be a reason for the rise of some cryptocurrencies. You can easily find a central figure behind some of the 2021 rallies:
SBF (Sam Bankman-Fried) is seen as a genius, which is one of the reasons for the incredible performance of $SOL (Sam is a bull and supporter of $SOL), and also the reason for the rise of $FTT.
CZ is the leader of Binance, which is part of the success of $BNB.
Su Zhu is seen as a god-like investor/trader, managing billions of dollars, and he is a bull for Avalanche, which is also a catalyst for $AVAX.
Elon Musk is one of the main reasons for the rise of $DOGE to a market cap of nearly $100 billion.
Do Kwon, the founder of Terra Luna, whose "confidence" (to say the least) may have played a role in the (initial) success of $LUNA.
Richard Heart, the colorful figure behind $HEX, is worshipped by the Hexicans.
Charles Hoskinson, the father of Cardano, may be one of the main reasons for the huge market cap of $ADA.
Andre Cronje, a central figure in Fantom ($FTM), and co-founder of some other projects, is seen as a genius by some.
Daniele Sestagalli led 3 crazy-rising projects: $TIME, $SPELL, and $ICE.
Two types of protagonists stand out: either "geniuses" or "community leaders/worshipped by the community." Remember this as you prepare for the next bull market.
Religion x Ponzi = upcoming rallies and sell-offs
The second and third catalysts are: religion and "Ponzi-like" token economics. Interestingly, these often come together. Ponzi economics usually means very high returns, ultimately unsustainable in some form. Religion is harder to explain, but a few examples will illustrate this:
Luna is one of the best examples: Do Kwon is a charismatic leader, with an obvious Ponzi economics component, the 20% Anchor yield on UST, and it's a bit like a religion, as community members call themselves "Lunatics," and if you challenge the sustainability of the UST model, you will face their opposition and attacks.
Olympus DAO ($OHM): The main catalyst for this is Ponzi economics, essentially a crazy high staking yield, and you may remember that Olympus has a leader, an anonymous Twitter figure called "Zeus."
Daniele Sestagalli's projects clearly have "degen" characteristics: Wonderland is an Olympus fork with higher yields, and Abracadabra has a "degenbox" product that allows people to loop their UST and earn leveraged Anchor yields, if I remember correctly. The community gathered around Daniele Sestagalli is called the "Frog Nation."
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
