Written by: Sovereign Crypto Translation: Vernacular Blockchain
The grim reality shows that this cycle is once again Proof 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 woes of the mainstream economy have combined to change the underlying structure of the crypto market, forcing us to rethink many of our past assumptions.
1. Capital flow dynamics
In previous cycles, capital flows were relatively stable. Predicted pattern:
1) New capital enters the Bitcoin (BTC) market first.
2) Then flow to Ethereum (ETH) and blue chip Tokens in search of higher returns.
3) Finally enter the small and micro-cap Token market, attracting retail investors chasing "life-changing gains."
However, the capital flow pattern of this cycle has changed significantly. Today’s crypto market can be effectively divided into two ecosystems: institutional tokens and retail tokens.
2. Institutional ecosystem
Mainly access BTC and ETH through spot ETFs. So far, funds have mainly flowed into BTC, keeping its price nearly 40% higher than its last all-time high (ATH). As the BTC market becomes saturated, institutional money may be looking for higher yields, leaving ETH ETFs as almost the only option. In this shift, a large amount of capital will move into ETH ETFs, and this flow of funds may cause the less liquid ETH market to react quickly (similar to what happened when the ETH spot ETF was initially approved, with a 15% price increase that day) ).
3. ETH rotation effect
The price increase of ETH may further affect blue-chip Tokens market, because crypto-native companies with actual ETH holdings will begin to prepare for the Alt-Season. At present, ETH's capital rotation seems to be very close, but the specific time still needs to be observed.
This leads to the second ecosystem: retail tokens.
4. Retail funds completely skip BTC and ETH
This is the first time in crypto history At one point, retail investors stopped dabbling in BTC and ETH, then gradually migrated their gains to riskier assets. They realize that they have missed out on the best opportunity for BTC and ETH from a "life-changing yield" perspective and therefore can only significantly increase their risk appetite.
In the real world, people are struggling: inflation is crushing them, high taxes, a stagnant job market, and a high cost of living make most people unable to Invest or save for retirement. They don’t care about BTC and ETH, but directly skip these “rich people’s coins” (BTC, ETH and blue chip tokens), download the Phantom wallet, and plunge into the seemingly endless world of “Memecoin” without looking back, trying to Looking for the "lottery" that can change your destiny. But most people will just fail and eventually quit crypto entirely.
1) The flow of funds in the retail ecosystem has been completely overturned:
Funds flow directly to Memecoin , completely bypassing technical or practical considerations. Profits are mainly concentrated in the hands of a few experienced "veterans" who, like souvenir merchants at tourist attractions, wait for the arrival of new retail investors to empty their wallets and lure them into believing that they can realize their dream of getting rich overnight ("Look at this guy"). Turn $50 into $1 million, you can do it too!”
Currently, the altcoin market has not generated new wealth inflows, only a "player versus player" (PvP) wealth redistribution away from retail investors. Go to a professional scammer. Although Memecoin initially appeared as an "anti-system" altcoin launched fairly, it has now transformed into a highly manipulated scam: scammers seize most of the distribution when the token is issued, and then implement a "rug pull" or even more Bad behavior. This game is time-limited, and the capital that can be absorbed is limited. Once it is exhausted, the funds will find a new home.
2) Expectation and impact
I predict that the current "Memecoin Casino" will self- Devour. The leading Memecoin will likely survive and perform well, while the rest will fade into oblivion, disappearing along with the wealth of retail investors. Even in the best-case scenario, this is nothing more than a giant game of drumbeat, in which more than 95% of participants will end up losing money.
The impact on the capital flows of major Tokens (such as SOL, AVAX, etc.) is that they will require large-scale venture capital, institutional funds and retail capital injections to be able to Triggering a new round of altcoin market. This will likely happen in the wake of the BTC and ETH capital spillovers, when institutions and retail whales start looking for riskier assets to carry their new gains. Recently, whale wallets have started net selling BTC.
5. GameFi's "Stubborn Virus"
In the GameFi craze early in this cycle , many game projects frequently launch "vapourware". These projects have poor game quality, high FDV (fully diluted valuation), useless Token economics, and many other problems. This chaos has led to a loss of credibility in the GameFi space.
Today, high-quality projects that have spent years carefully building and preparing to go live face huge challenges and need to overcome this negative stereotype to gain market attention. . Despite this, there are indeed some excellent projects with potential in the GameFi field. Once a successful game appears, its effects may trigger a large-scale speculation boom throughout the GameFi ecosystem.
6. Current status of launch pad
Launchpad has almost disappeared, but Survivors may experience a strong recovery.
Venture capital funds (VCs) have tried to extract maximum value from retail investors, leading to the destruction of this model: long unlock period, high FDV, exploitative Centralized exchange (CEX) listing strategies and predatory market-making practices have put startup platforms in trouble.
A new model is emerging, showing significant advantages: low FDV, high unlocking ratio, and no CEX listed projects are far superior to the old model of VC project. Investing in top launch platforms will become key as these opportunities will be more scarce and have higher barriers to entry.
What is certain is that it only takes a few 50x or 100x projects to come online for retail investors to rush to buy the launch platform Token and seize entry. qualifications.
7. 95% of Tokens are unnecessary and useless
Frankly speaking, encryption The main function of Token is speculation. Only 5% of tokens are truly useful and represent partial ownership of revolutionary technologies and platforms. The remaining tokens are purely speculative games and will eventually return to zero. But at the same time, picking the right projects can reap huge rewards.
8. Dilution makes the market crowded and difficult to find direction
In 2020, encryption The number of Tokens in the market was approximately 10,000 at the peak of the market. Today, the same number of Tokens are created every day. The vast majority of these projects are worthless, but they create a kind of "noise" that masks the truly valuable and innovative projects. There is no doubt that these revolutionary projects do exist, but they are difficult for the average investor to find, especially those with only a superficial understanding of the crypto space.
This also explains why many newcomers prefer to invest in Memecoin. They don't need to understand complicated technology, they just need to see a cute dog wearing a hat whose only "function" is that it has no function - coupled with the excitement of "winning the lottery", it is attractive enough. .
9. The value output of KOL is far lower than the value of its plunder
In the encryption field Influencers have degenerated to the point where only a handful are left that can provide value and information. Most people turn to ridiculous headlines, shameless promotion, and even outright fraud.
The rise of Memecoin has greatly reduced the role of these Internet celebrities in real data. Instead, they have devoted themselves to unscrupulous promotion and "pump and dump" . Be sure to carefully identify useful information and do not blindly follow these "pseudo shepherds".
11. MicroStrategy may become the GBTC of this cycle
MicroStrategy ($MSTR) pair The premium to its net asset value (NAV) is growing wildly, reflecting strong demand for Bitcoin in traditional financial markets. However, as the cycle draws to a close, this premium is likely to reverse and turn into a discount. Pay attention to this indicator, it may be a signal of a cycle reversal. Although there will inevitably be calls for a "super cycle" at the peak of a bull market, it will inevitably be followed by a large-scale bear market decline.
For those who can identify these signals, this may become an excellent opportunity to short the market, but it will not appear in the short term.
12. The altcoin season is "dead", Ethereum is "dead"...the ultimate reverse indicator
The market is filled with pessimistic voices about Ethereum and altcoins "no more market". However, this is a perfect contrarian indicator.
Despite Ethereum's underperformance, I still hold a firm position in it, along with long-term altcoin positions (some outperforming, some not) worse). Whenever everyone focuses on the price increase of Bitcoin and abandons positions in altcoins and Ethereum, the market for altcoins and Ethereum will not really usher in until the crazy pursuit of BTC at the local top.
13. ETF options will bring huge volatility - whether it is rising or falling
On the first day of IBIT's listing alone, there were nearly US$2 billion in nominal option value transactions, most of which were concentrated in call options (betting on the rise in BTC prices). Sellers of these calls typically hedge by purchasing the underlying ETF, driving the price higher. This trend is likely to continue in the coming months.
14. Regulatory clarity is a huge benefit, removing barriers to entry in the crypto space
In past cycles, capital entering the crypto space has faced various obstacles, such as difficulties in depositing and withdrawing funds, uncertain regulation, pending legal cases, and excessive caution on the part of trading platforms and crypto companies. Now, that has completely changed. The launch of spot ETFs and regulatory clarity not only opens the floodgates for capital entering the crypto space, but also provides opportunities for capital that wants to invest in crypto startups.
Everything fell into place...no one could have predicted that so many positive factors would coincide with such perfect timing. This bull run has the potential to be the most explosive in history, including altcoins and Ethereum. Be patient!
Benefits realized include:
Bitcoin and Ethereum spot ETFs approved
Trump’s attitude towards cryptocurrencies has changed significantly, and Promote positive supervision
Trump won the election
SEC Chairman Gary Gensler resigns
Sovereign entities of various countries purchase Bitcoin
China "unbans" cryptocurrency again
Coinbase and Favorable legal precedent set in XRP case
Stablecoin minting hits record high
Bitcoin and Ethereum trading platform balances hit record lows
MicroStrategy Plans to buy $42 billion in Bitcoin over the next three years
Bitcoin ETF has become the largest product in ETF history, surpassing gold ETFs are orders of magnitude larger
15. Infrastructure improvements amplify bull market potential
Trading platforms, wallets, DeFi protocols, and access to traditional finance have all been significantly improved. The user interface and user experience have become simpler and easier to use, and are continuously optimized in a more friendly regulatory environment. These improvements have significantly reduced resistance and will attract more retail capital to enter. Once the bull market starts, the scale of capital inflows will be immeasurable.
16. Summary
The development of this crypto bull market is full of unpredictable factors. However, one thing that is always easy to predict in every cycle is the inevitable emotional reaction of retail investors: The latest overvalued project is awesome, buy it! Old undervalued project is too boring, sell! Altcoins are out, buy Bitcoin! Ethereum is dead, sell it!
This emotional reaction is always comparable to the "Cramer effect" (Cramer-like), making it a perfect contrarian indicator. Eventually, 95% of retail investors will lose money. Be one of the 5%, contrarian thinking is key. Good luck to everyone!
Miyuki
Weiliang
Kikyo
Anais
Catherine
Alex
Weatherly