Exploring the Fundamental Differences of This Cycle and Their Impact on the Remaining Bull Market.
Author: Sovereign Crypto
Translation: Blockchain in Plain Language
The harsh reality shows that this cycle once again proves that while there may be some similarities between market cycles, they are by no means exact replicas. Institutional adoption driven by ETFs, changes in the political environment, and the dilemmas of mainstream economics have collectively altered the underlying structure of the crypto market, forcing us to rethink many of our previous assumptions.
1. Dynamics of Capital Flow
In previous cycles, capital flow followed a relatively predictable pattern:
1) New capital first enters the Bitcoin (BTC) market.
2) It then flows to Ethereum (ETH) and blue-chip tokens in search of higher returns.
3) Finally, it enters the small and micro-cap token market, attracting retail investors chasing "life-changing returns."
However, the capital flow pattern in this cycle has changed significantly. The current crypto market can effectively be divided into two ecosystems: Institutional Tokens and Retail Tokens.
2. Institutional Ecosystem
Mainly accessed through spot ETFs for BTC and ETH. As of now, capital is primarily flowing into BTC, pushing its price nearly 40% above the last all-time high (ATH). As the BTC market becomes saturated, institutional funds may seek higher returns, with ETH ETFs becoming almost the only option. In this transition, a large amount of capital will shift towards ETH ETFs, and this flow of funds could lead to a rapid price response in the less liquid ETH market (similar to when the ETH spot ETF was initially approved, causing a 15% price increase on that day).
3. ETH Rotation Effect
The rise in ETH's price may further impact the blue-chip token market, as crypto-native companies holding actual ETH positions will begin to position themselves ahead of the alt-season. Currently, the capital rotation into ETH seems very close, but the exact timing still needs to be observed.
This leads to the second ecosystem: Retail Tokens.
4. Retail Capital Completely Skips BTC and ETH
This is the first time in crypto history that retail investors are no longer involved in BTC and ETH, gradually shifting their gains to higher-risk assets. They realize that, from the perspective of "life-changing returns," they have missed the best opportunities in BTC and ETH, and thus must significantly increase their risk appetite.
In the real world, people are struggling: inflation is pressing down on them, high taxes, a stagnant job market, and high living costs leave most unable to invest or save for retirement. They are indifferent to BTC and ETH, instead skipping these "rich people's coins" (BTC, ETH, and blue-chip tokens), downloading Phantom wallets, and diving headfirst into the seemingly endless world of "Memecoins," trying to find a "lottery ticket" that can change their fate. But most will only encounter failure and ultimately exit the crypto space entirely.
1) The Capital Flow of the Retail Ecosystem Has Been Completely Disrupted:
Funds flow directly into Memecoins, completely bypassing considerations of technology or utility. Returns are mainly concentrated in the hands of a few experienced "veterans," who, like souvenir vendors at tourist attractions, wait for new retail investors to arrive and empty their wallets, tempting them to believe in the dream of overnight wealth ("Look at this case of turning $50 into $1 million; you can do it too!").
Currently, the altcoin market has not generated new wealth inflows; it is merely a "player versus player" (PvP) redistribution of wealth, shifting from retail investors to professional scammers. Although Memecoins initially emerged as fairly launched "anti-establishment" altcoins, they have now transformed into highly manipulated scams: scammers seize a large portion of the allocation at the token's issuance, followed by "rug pulls" or even worse actions. This game is time-limited, with a finite amount of capital that can be extracted; once it is drained, the funds will seek new homes.
2) Expectations and Impact
I expect that the current "Memecoin casino" will self-destruct. Leading Memecoins may survive and perform well, while the rest will gradually be forgotten, disappearing along with the wealth of retail investors. Even in the best-case scenario, this is merely a massive "hot potato" game, where over 95% of participants will end up with losses.
The impact on the capital flow of major tokens (such as SOL, AVAX, etc.) is that they will require significant venture capital, institutional funds, and retail capital injections to trigger a new round of altcoin rallies. This may occur after the overflow of funds from BTC and ETH, when institutional and retail whales begin to seek higher-risk assets to accommodate their newly gained profits. Recently, whale wallets have begun to net sell BTC.
5. The "Stubborn Virus" of GameFi
In the early phase of this cycle's GameFi boom, many game projects frequently launched "vapourware," which had poor game quality, excessively high FDV (fully diluted valuation), useless token economics, and numerous other issues. This chaos has damaged the reputation of the GameFi sector.
Now, those high-quality projects that have spent years building and preparing to launch face enormous challenges in overcoming this negative stereotype to gain market attention. Nevertheless, there are indeed some promising projects in the GameFi space, and once a highly successful game emerges, its effects could trigger a massive speculative frenzy across the entire GameFi ecosystem.
6. The Current State of Launchpads
Launchpads have nearly disappeared, but survivors may see a strong resurgence.
Venture capital funds (VCs) once tried to extract maximum value from retail investors, leading to a breakdown of this model: long lock-up periods, high FDV, exploitative centralized exchange (CEX) listing strategies, and predatory market-making practices have put launchpads in a difficult position.
A new model is emerging, showing significant advantages: projects with low FDV, high unlock ratios, and no CEX listings far outperform the old VC model projects. Investing in top launchpads will become key, as these opportunities will be scarcer and have higher entry barriers.
It is certain that just a few projects launching at 50x or 100x will cause retail investors to scramble to buy launchpad tokens and secure entry qualifications.
7. 95% of Tokens Are Unnecessary and Useless
To be frank, the primary function of crypto tokens is speculation. Only 5% of tokens truly have utility, representing partial ownership of revolutionary technologies and platforms. The rest are purely speculative games that will ultimately go to zero. However, at the same time, choosing the right projects can yield massive returns.
8. Dilution Makes the Market Crowded and Directionless
In 2020, the number of tokens in the crypto market peaked at around 10,000. Now, the same number of tokens is created daily. The vast majority of these projects are worthless, but they create a "noise" that obscures truly valuable and innovative projects. Undoubtedly, these revolutionary projects do exist, but ordinary investors find it difficult to locate them, especially those whose understanding of the crypto space is limited to the surface.
This also explains why many newcomers prefer to invest in Memecoins. They do not need to understand complex technologies; they just need to see a cute dog wearing a hat, whose only "function" is to have no function—combined with a sense of "lottery winning" excitement, this is already enticing enough.
9. The Value Output of KOLs Is Far Lower Than the Value They Plunder
Influencers in the crypto space have devolved to a point where only a few can provide value and information. Most have turned to ridiculous clickbait, shameless promotions, or even outright fraud.
The rise of Memecoins has significantly reduced the role of these influencers in real data, as they instead fully engage in unscrupulous promotions and "pump and dump" schemes. It is essential to carefully discern useful information and not blindly follow these "false shepherds."
11. MicroStrategy May Become the GBTC of This Cycle
MicroStrategy ($MSTR) is experiencing a crazy increase in its net asset value (NAV) premium, reflecting strong demand for Bitcoin in traditional financial markets. However, as the cycle approaches its end, this premium is likely to reverse and turn into a discount. Pay attention to this indicator, as it may signal a cycle reversal. Although there will inevitably be calls for a "super cycle" at the peak of the bull market, what follows will certainly be a massive bear market decline.
For those who can identify these signals, this may become an excellent opportunity to short the market, but it will not happen in the short term.
12. The Altcoin Season Is "Dead," Ethereum Is "Dead"… The Ultimate Contrarian Indicator
The market is filled with pessimistic voices about Ethereum and altcoins "no longer having a market." However, this is precisely a perfect contrarian indicator.
Despite Ethereum's poor performance, I remain firmly positioned in it, while also holding long-term altcoin positions (some performing well, others poorly). Whenever everyone focuses on the price rise of Bitcoin and abandons their positions in altcoins and Ethereum, it is only when they frantically chase BTC at local tops that the real altcoin and Ethereum market will emerge.
13. ETF Options Will Bring Huge Volatility—Whether Up or Down
On the first day of IBIT's listing, nearly $2 billion in nominal options value was traded, mostly concentrated in call options (betting on BTC price increases). The sellers of these call options typically hedge by purchasing the underlying ETF, thereby pushing up the price. This trend may continue in the coming months.
14. Regulatory Clarity Is a Huge Positive, Eliminating Barriers to Entry in the Crypto Space
In previous cycles, capital entering the crypto space faced various obstacles, such as difficulties in deposits and withdrawals, uncertain regulations, pending legal cases, and excessive caution from trading platforms and crypto companies. Now, this situation has undergone a complete transformation. The launch of spot ETFs and regulatory clarity not only opens the floodgates for capital entering the crypto space but also provides opportunities for funds looking to invest in crypto startups.
Everything is in place… No one could have predicted that so many positive factors would coincide at such a perfect time. This bull market has the most explosive potential in history, including altcoins and Ethereum. Be patient and wait!
Realized positives include:
- Approval of Bitcoin and Ethereum spot ETFs
- Trump's significant shift in attitude towards cryptocurrencies, promoting positive regulation
- Trump's comprehensive victory
- SEC Chairman Gary Gensler resigns
- Sovereign entities in various countries purchasing Bitcoin
- China "unbans" cryptocurrencies again
- Favorable legal precedents established in the Coinbase and XRP cases
- Stablecoin minting reaches an all-time high
- Bitcoin and Ethereum exchange platform balances hit an all-time low
- MicroStrategy plans to purchase $42 billion worth of Bitcoin over the next three years
- Bitcoin ETF becomes the largest product in ETF history, several orders of magnitude larger than gold ETFs
15. Infrastructure Improvements Amplify Bull Market Potential
Trading platforms, wallets, DeFi protocols, and access methods to traditional finance have seen significant improvements. User interfaces and user experiences have become simpler and more user-friendly, continuously optimized in a more favorable regulatory environment. These improvements have greatly reduced friction and will attract more retail capital; once the bull market starts, the scale of capital inflow will be immeasurable.
16. Summary
The development of this crypto bull market is filled with unpredictable factors. However, there is always one thing that is easy to predict in every cycle: the inevitable emotional reactions of retail investors: The latest overhyped projects are amazing, buy! The old undervalued projects are too boring, sell! Altcoins are cooling off, buy Bitcoin! Ethereum is failing, sell it!
This emotional reaction is always comparable to the "Cramer Effect," perfectly serving as a contrarian indicator. Ultimately, 95% of retail investors will lose money. Make sure to be part of that 5%; thinking contrarily is key. Good luck to everyone!
Article link: https://www.hellobtc.com/kp/du/11/5556.html
Source: https://medium.com/coinmonks/the-state-of-the-crypto-markets-and-the-unique-future-of-this-bull-run-6cbc91b046d0
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。
