Throughout December 2024, adjustment is undoubtedly the main tone of the market. Although the maximum drop of Bitcoin from its high is only 15%, many altcoins have been cut in half, and even some altcoins have completely erased all of their gains from this round of bull market. According to CoinMarketCap data, the median maximum drop among the top 100 coins during this round of adjustment is 44%. Such a sharp decline has only occurred in the crashes of May 19 and March 12 over the past five years. Therefore, this adjustment has also dealt a heavy blow to the altcoin market. So, is there still an opportunity for altcoins?
On this issue, my viewpoint is very clear: the altcoin market has not ended.
First, from the trading perspective, the trend of funds flowing into altcoins has become very obvious, mainly reflected in the following two aspects: First, the position volume of this round of altcoin market has seen explosive growth, and the growth rate far exceeds that of Bitcoin. Although the massive liquidation in December led to a nearly $10 billion decline in the scale of open contracts, the current scale of open contracts is still about 40% higher than the peak of the small bull market in March 2024. This reflects that altcoins are still the main direction of capital speculation; second, although the scale of altcoins has surpassed that of March 2024 and even reached the highest level in nearly three years, the peak of the weighted average funding rate of altcoins in this round of market still remains far below that of March 2024. This indicates that the market's bullish sentiment is still in a state of mild fermentation.
Secondly, at the policy level, although Trump's plan to include Bitcoin in the national reserve faces significant challenges, the likelihood of him seeking benefits for his family and political allies remains high. In the past month, the DeFi protocol founded by Trump's family has purchased large amounts of ETH, LINK, AAVE, ENA, ONDO, and other tokens. These investments mainly bet on two major positive factors: first, Trump's nomination of cryptocurrency supporter Paul S. Atkins as SEC chairman, thereby promoting the lifting of the Ethereum ETF staking restrictions; second, Trump's nomination of asset tokenization supporter David Sacks as the White House cryptocurrency director, responsible for drafting the legal framework for cryptocurrencies and providing legal support for advancing asset tokenization.
Moreover, during Trump's election campaign, Musk and the founder of XRP provided him with funding and resource support, thus, the outside world generally expects that after Trump is elected, DOGE is likely to become a newly approved cryptocurrency ETF project, and the legal dispute between XRP and the SEC will also be resolved soon. In summary, as a series of favorable policies gradually take effect, new trading opportunities in the cryptocurrency market will arise.
In fact, since the market share of Bitcoin peaked at 60% and then fell back, the daily trading share of altcoins (excluding the top ten by market capitalization) has long remained above 40%, always in a dominant position. Investors feel that the altcoin market is sluggish because the daily trading volume has plummeted from $300 billion to $150 billion, leading to a situation where there are many monks but little porridge. In a market characterized by reduced competition, funds are mainly breaking out in two directions: one is to concentrate on strong trends in coins like SUI, AAVE, XRP, etc.; the other is to cluster around popular themes for speculation, such as AI Agent, DeSci, RWA, etc.
Since the market bottomed out on December 20, AI Agent has undoubtedly become the hottest theme in the market. The most typical phenomenon is that among the top ten coins on CoinMarketCap's gain list, more than half are related to AI Agent. The two star projects of AI Agent, Ai16z and Virtual, have also undoubtedly become some of the strongest tokens in terms of fundraising ability in December 2024. Since funds have already deeply entered this field, the AI Agent market is likely to continue for several months. For investors, to achieve considerable excess returns, they still need to closely follow market hotspots. However, I do not believe that chasing Ai16z and Virtual at their current heights is the best choice for participating in AI Agent. On the contrary, second-tier projects that have already undergone sufficient adjustments, such as ACT, GOAT, GRASS, etc., are more likely to yield trading opportunities.
In the operation of altcoins, what types of trading opportunities investors focus on mainly depend on their personal risk preferences and profit expectations.
For conservative investors, I personally believe that the platform tokens of leading exchanges still have a high safety margin, as the current valuations and growth prospects are quite good. At the same time, the leading companies in most sub-sectors have experienced pullbacks that provide good entry opportunities, such as UNI, LINK, AAVE in the DeFi sector.
For those speculators who are keen on emotional gambling, AI Agent and RWA are undoubtedly directions with high odds. The logic of the former has been analyzed earlier, while the latter has shown signs of accelerated advancement following Trump's election victory. First, the appointment of White House cryptocurrency director Sacks provides strong support for asset tokenization; second, institutions such as BlackRock, Franklin Templeton, Tether, and Visa are actively arranging asset tokenization. As mentioned by a16z's policy director Brian Quintenz, regulatory director Michele Korver, and general counsel Miles Jennings in a joint article: the channels for constructive engagement with regulators and legislative bodies have now been opened. As regulatory systems gradually become clearer, project parties exploring blockchain services and issuing tokens have become possible.
