Old people who have experienced more than two cycles of the cryptocurrency market probably miss the scene of thousands of coins soaring and everyone prospering in the past big cycle. In fact, many people are broken in this cycle. Small coins rise slowly and fall quickly, and they are back to the pre-liberation era. From March to now, my own understanding of small coins has also gradually evolved. Today I just sorted out my previous tweets.
1. In March, I think this cycle of copycat season may be very mild.
The mild trend is characterized by large fluctuations, and it is normal to advance three times and retreat one or advance three times and retreat two. Unexpectedly, the prophecy came true. Since April, many altcoins have been cut in half, and a drop of 60% to 70% is common. It is really a three-fold increase and a two-fold drop, or even a larger amplitude.
The core reasons are:
The funds coming from the big pie ETF only embrace big pie;
The scale is too large. I should be the first one to look at the future trend from the perspective of market value. This cycle started with tens of billions of US dollars, and hundreds of billions of US dollars are a lot. The larger the scale, the more compressed the space will be.
2. In April, the new normal of the cryptocurrency market was proposed based on the current differentiation of the U.S. stock market.
The conclusion is: the more mature the market, the stronger the effectiveness. The manifestation of effectiveness is that the most growth (narrative) and certain targets must attract the most attention and funds. It should be noted that the Matthew effect in the capital market is very obvious, and this aspect will be reflected very thoroughly in the future currency market, so the differentiation will become more and more serious.
The average market value of the bottom 3,000 of the 5,000 companies in the U.S. stock market is 800 million U.S. dollars, and the daily trading volume is less than 2 million U.S. dollars. This is a very painful fact. The differentiation of the U.S. stock market is not formed this year, but has lasted for many years. The new normal of the currency market will also be the same in the future
3. If we use the US stock market as an analogy, the future structure of the cryptocurrency market will be very clear.
The US stock market is now very stratified: the leading Big3 and Mag7, nearly 100 second-tier market value stocks in the middle, and thousands of small and medium-sized market value stocks. If we have to make an analogy, the strong mainstream such as Bitcoin, Ethereum, BNB, and Sol are more like the second-tier market value stocks in the US stock market. They have performed very well in the past year and have risen a lot, and the retracement range is also acceptable. They were able to keep up with the Big3 and Mag7 before.
The rest of the cryptocurrency alts are actually more like the Russell 2000 Index (a representative index of small-cap stocks in the U.S. stock market). They rose a little from the bottom but quickly deflated and are still quite far from their previous highs (however, the Russell 2000 has soared slightly recently due to expectations of interest rate cuts, while the cryptocurrency alts are still lying flat).
4. How did the current plight of copycats come about?
The popularity of the previous cycle has greatly boosted the size of crypto VCs. The larger the size of VCs, the more difficult it is to invest in small projects. In addition, I also have a group of founders with very good backgrounds entering the market, and jointly pushing up the valuation of the primary market. This year, I found that the market liquidity is not sufficient and the secondary market cannot handle such a high market value.
Another problem is that the application is nowhere near being implemented, and the market is fed up with reinventing the wheel without creating value.
5. How to invest in the new normal
In the past, the focus of cryptocurrency investment was on timing (at the bottom of a big cycle or the start of a big market, when the big coins led the way and small coins all soared), but in the future, both timing and coin selection will be equally important (target screening is far more important than before)
It should also be made clear that the copycat season that everyone previously imagined would bring prosperity to everyone is actually likely to be limited to the leaders of the main narrative logic sectors, and most of the small coins will likely be a one-wave flow that comes and goes quickly.
6. If we combine this with the baseline scenario of limited easing in the next one or two years
Differentiated and structured markets may still appear, and the market breadth will also be partially expanded from extreme concentration to a small number of targets that have both certainty and growth.
Betting everything on the stock may not be a good choice. Lowering expectations and concentrating positions on a few stocks with strong consensus and high liquidity may be the safest option.
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