Source X: Jack Vi analysis
Author: The Giver
This article is a summary from the author The Giver (✍️). There are many Insights for everyone 😍
📢 The author provides an in-depth analysis of inefficient capital allocation in the crypto market, focusing on how money flows and market behavior affect major assets such as BTC, SOL, ETH, and altcoins (alts).
✍️ 1. Oversupply and liquidation
The crypto market has experienced four large liquidations, each worth around $1 billion, in 2024. The most recent liquidation broke the 8-month BTC price range, creating an opportunity to analyze the market's microstructure and liquidity.
The supply surplus is mainly coming from altcoin emissions and BTC/ETH sales from large holders.
These liquidations create a rebalancing of investors positioning themselves towards “safe haven” assets like BTC, SOL, and meme coins. $SOL
✍️2. The Decline of BTC Dominance
The author predicts that BTC Dominance will decline relative to ALT/OTHERS, despite BTC's current strength. The author estimates that there is a 70-80% chance that BTC will not maintain its dominance as money flows into alts.
The case of BTC dropping 20-30% and dragging the market down is considered less likely (20-30% chance).
BTC Dominance is currently around 50%, down from previous highs as altcoins and new projects attract more liquidity.
✍️3. Cycle analysis
The author studied 5-year (L5Y) data on price, volume, and dilution of over 150 altcoins, showing the cyclicality of the market.
Having passed 600 days in the current cycle, the author argues that we are either nearing the end of the bull cycle or this cycle will disrupt previous patterns due to external factors such as ETF approvals.
Money flows have fallen significantly from their peak in March 2024, with little new money flowing into the market.
✍️4. Positioning by consensus
ETH is in low demand after the liquidations in August 2024, with ETH's position in the market weaker than other major coins.
For example, ETH dominance in TOTAL3 (market cap excluding BTC and ETH) dropped to 16% on August 12.
Meanwhile, OTHERS, which includes coins like AVAX, SOL, and SUI, are at their lowest levels in the cycle.
The author estimates that there is about $300-400 billion in capital ready to be invested, but waiting for triggers to move from major coins to alts.
✍️5. New money and capital reallocation
The author questions where $1 of capital can be most efficiently created for market capitalization, suggesting that BTC may no longer be the best vehicle for wealth creation compared to newer or smaller altcoins.
BTC is the best-performing single asset this year (YTD), but the author argues that alts will deliver higher returns in the next cycle.
Studies show that smaller coins, especially Layer 1 (L1), outperform when capital flows shift.
✍️6. Examples of altcoin growth
DOGE: This meme coin has had strong rallies during short liquidations, with 6-10x price increases in previous cycles, supported by order-book replenishment.
SUI, MKR, AAVE: These altcoins show huge upside potential after liquidations. MKR increased 200% in Q3 2024 after capital flowed in from BTC. $SUI
SOL and AVAX: Both debuted at less than 5% fully diluted value (FDV), but reached $10 billion market cap at their peak. SOL is expected to continue to lead in the coming cycles.
✍️7. BTC and miner dynamics
Major mining companies like Marathon Digital (MARA) and Riot Platforms (RIOT) have accumulated large amounts of BTC, with MARA owning 19K BTC at an average price of $41K, and RIOT owning 9K BTC.
However, miners have refrained from selling BTC, suggesting they are waiting for a price increase.- The author believes that without new demand, BTC may not reach a new high (ATH) in 2024, due to the lack of leverage and economic stimulus, factors that supported the previous cycle.
✍️8. Focus on Layer 1 and new coins
Layer 1 blockchains (like SOL, AVAX, SUI) and new coins are the best growth opportunities based on historical performance. $AVAX
The author emphasizes that coins with low liquidity and small market capitalization could see significant price increases in the next cycle.
Take SOL and AVAX, both of which have seen significant growth in previous cycles and are expected to continue to outperform due to their solid technical foundations and communities.
✍️9. Market signals and future predictions
The author believes that liquidation was the trigger for the capital reallocation, noting that after August 12, OTHERS had a 7-day outperformance against BTC.
Future predictions include capital rotation into smaller meme coins and new projects as BTC and major assets stagnate.
The author concludes that altcoins that have dropped 90-95% since the Token Generation Event (TGE), such as SOL and AVAX, still have a lot of growth opportunities and could lead the market expansion in the future.
📌In conclusion, the author's analysis provides a detailed view of the current state of the crypto market, highlighting opportunities in alts and Layer 1 blockchains, while questioning whether BTC can maintain its position without new capital inflows.
📌The author emphasizes the importance of identifying market cycles, liquidating and reallocating capital to take advantage of growth opportunities in undervalued altcoins.
