Metrics Ventures: Risks are released in an orderly manner, but copycat chips still need to settle.

Author: Metrics Ventures, Source: @MetricsVentures

The wide range of fluctuations will eventually end, and the risk-return ratio of profiting through "selling high and buying low" will drop significantly. It is a wiser choice to stay focused on the market and do a good job of identifying the turning point after the market trough.

I.Metrics Ventures September Market Observation Guide for Secondary Funds in Crypto Market

1/ Recently, Bitcoin has continued to fluctuate between 50,000 and 60,000, and market sentiment is low. Trading volume hit a new low in a single day, the fee rate continued to be negative, and the Ethereum exchange rate fell below a new low again. The market has already reached a freezing point. The altcoins rebounded after the FOMC broke the emotional freezing point, but it was still driven by a chip vacuum, and the market trading volume remained sluggish.

2/ Continuing the analysis of last month, altcoins are generally in a consolidation stage after the pullback from the 3/4 month high. However, the accumulation of time in the chip law is crucial, and we have not yet observed signs that the altcoins are ready in batches. It is worth noting that many of the chips of the target failed to form an effective distribution and passively pulled back to the low point, which means that market makers still have the motivation to maintain prices or drive a rebound in the short window after the sentiment freezes. This may be a positive signal.

3/ From the current perspective, we believe that the international risk market has released risks for the first time since August. Although some altcoins have made good repairs this month, we believe that crypto assets still need time to accumulate strength. At present, the market will continue to be in a state of disorderly fluctuations. Looking ahead, we believe that the adjustment and accumulation this year will be a good foundation for the market next year, and there is no need to worry too much about the volatility of the market.

II.Inventory and Comments on the Overall Market Conditions and Market Trends

The market performance this month was flat, and the hype and duration were weaker than at the beginning of 2023. The market once again widely discussed the problem of blockchain native innovation represented by Ethereum and its penetration rate being blocked. From a certain perspective, the current level of depression even exceeds that of 2019. As the mood eased after the FOMC, some cottages have made good recovery trends, but the market is still scattered and the trading volume is sluggish.

Looking back on the trend, Bitcoin has continued to fluctuate in a disorderly wide range since April. This is mainly due to the simultaneous shrinkage of trading volume, market attention and risk appetite. It is worth noting that we are witnessing a disorderly wide range of fluctuations close to a new high, which confirms our consistent view that we may be experiencing a unique major asset cycle.

From the perspective of altcoins, the current market opportunities are mainly concentrated on chip games. This highlights the nature of the current lack of narratives and weak endogenous driving forces in the industry. Except for AI and Meme, there has not yet been an obvious trend of capital synergy and main narrative. As we mentioned earlier, the market's pricing model and gameplay transformation have gradually been recognized by more practitioners.

However, the characteristics of the reflexive market remain the same. If this trend continues, pure games driven by narratives and chips may reappear in the future, once again highlighting the "casino" nature of the market. From the perspective of secondary market operations, the grasp of the escape window and the choice of escape posture become increasingly important.

Overall, our work focus will continue to revolve around waiting. The wide range of fluctuations will eventually end, and the risk-return ratio of profits through "selling high and buying low" will drop significantly. It is a wiser choice to keep your focus on the market and do a good job of identifying the turning point after the market trough.

Three, Industry Development Trends

1. The primary market VC is undergoing a dramatic reshuffle, and small and medium VCs are being cleared out. The DPI of many projects is even less than 1. On the contrary, the head VC continues to grow and quickly completed a new round of financing in just 5 months. In the future, the primary market will show an extremely polarized development trend. In addition to the head VC, only incubators that focus on early projects and have unique tastes, or vertical VCs that focus on specific ecosystems can use super high odds and competitive advantages in vertical fields to find a living space in the market.

2. The most discussed application tracks are social finance (SocialFi) and artificial intelligence encryption (AI Crypto). There are hard obstacles to the implementation of AI, and it is necessary to wait for the critical moment of technological breakthrough. Pumpfun is the most successful SocialFi case, and the SocialFi that is truly suitable for Web3 is not the Web3 version of Twitter, but a socialized casino.

3. BTC, stablecoins/payments and casinos are the only proven effective business models in the industry. Stablecoins have become the new "volume king" track in the primary market, but no one can clearly explain how to break the network effect of Tether. The development trend of the industry is becoming clearer. Except for BTC, the final business model of Web3 is casino.

4. Quantitative returns continue to be under pressure, and many quantitative teams that have switched from A-shares are pouring into the crypto market. However, considering the overall size of the current quantitative market and the comparison with active trading liquidity, quantitative returns are expected to shrink further. At the same time, we should be wary of high-leverage quantitative strategies, because in extreme market conditions, the risk of liquidation faced by these strategies is constantly rising.