The impact of the big A wave began to recede, BTC re-stood above 64K, and most small coins also saw a 2~20% increase.

I took a quick look and found that MEME had the largest increase. Then I looked at the top 300 projects by market capitalization and found that there were 43 tokens that outperformed Bitcoin, 50% of which were MEME. This is a very scary thing.

In the past few cycles, although there have been MEMEs like DOGE\SHIB, they are not the mainstream voices. Everyone is more willing to discuss DeFi, NFT, metaverse, layer2. However, in this cycle, without talking too far ahead, just look at today's increase. The ones with the least increase are old projects, and the ones with the most increase are MEME.

This is not the fault of the users. Among ten retail investors who buy MEME coins, 9.5 of them know that this is the ultimate gambling, but why do they continue to participate? Apart from the extreme gamblers, I always feel that other users are forced to do this. If there are a few star projects that "do things" in the market, this market is not like this.

But it is really difficult to solve in the short term. In the next 6 years, there are still 155 billion US dollars worth of tokens waiting to be unlocked in the market. What does it mean? I think if the economy continues to decline, VC tokens may experience a systemic risk.

In May, Binance released a report called (Observations and Thoughts on the Current Situation of Highly Valuable and Lowly Circulated Tokens) (please ask an assistant to get it if you need it). The two most critical data discussed in the report are:

1. From 2022 to 2024, the initial circulation of the project will drop from 40.2% to 12.3%;

2. From 2024 to 2030, it is estimated that tokens worth US$155 billion will be unlocked.

Let’s talk about the significance of these two data.

There are two types of DeFi projects. One is community tokens, represented by aave\snx; the other is VC tokens, represented by uni\crv.

In the huge bull market supported by the new concept and the halving of Bitcoin, the increase in community tokens started at 100 times, while the highest increase in VC tokens was only 20 times, and the highly anticipated CRV even broke the issue price.

But even if the growth of VC-type tokens is lower than that of community tokens, there is still a huge growth. Why? Because the initial circulation of tokens is relatively large, the valuation is relatively low during the financing of the primary market, and with the large amount of money released, there is a lot of room for the secondary market.

After 2023 and 2024, the valuation of VC projects in the primary market has risen sharply, and the circulation of tokens has also dropped sharply. The primary valuation has skyrocketed, and the secondary market has to pay for it. At the same time, the circulation is very small, which will make the project go public at the highest price, and then continue to form selling pressure.

One or two projects are fine, but what about a dozen projects with a super high total market value? From 2017 to now, the amount of funds entering the primary crypto market has reached 91 billion US dollars, of which 80 billion increased sharply from 2021 to 2023.

A large number of VCs are Fomo, and there are only a few dozen projects worth investing in, which will inevitably lead to super-high premiums for so-called star products. It can be said that the next few years will be a period of valuation digestion for VC tokens.

Now comes the real question: Can the $155 billion of tokens in the next six years be absorbed? I think it is highly unlikely.

The biggest problem of cryptocurrencies is the inverted relationship between primary and secondary funds. Most of the market participants are retail investors, and there are no long-term and solid public funds. Many institutions only buy Bitcoin and Ethereum in the secondary market, and other tokens are poorly allocated. For example, the Grayscale Management Fund had 40 billion at its peak, but only a few million were allocated to DeFi, less than 0.01%.

On the other hand, the selling pressure of Bitcoin has always come from miners. Every time Bitcoin is halved, the selling pressure from miners becomes smaller. Coupled with the continuous long-term purchase of funds and ETFs, the market value of 1.269 trillion only has a selling pressure of 8 billion per year. The VC coins with a market value of 400 to 500 billion have a selling pressure of 150 billion. So why is only Bitcoin rising now? Most of the reasons are here.

Binance estimates that 80 billion yuan is needed to take over. Of course, there is so much money in the market, but will it take over? Unlikely. Because these tokens have no practical application on the C-end. In other words, at this stage, these projects have no profit expectations, or even user growth expectations. Look at Zksync. How much has the TVL dropped after the airdrop ended? How much on-chain activity is left?

Dragonfly's partner mentioned before that the culprit of this round is that VCs don't take each other's shares. So, if we exclude the VC part, how much money is left in the market? In the last round of public chain inscription, I made a rough estimate of the data. The pure retail funds are several billion US dollars. If the project does not meet expectations, 155 billion will not be enough.

This is the systematic risk of VC tokens, and it is also paying for the VC madness from 2021 to 2023. However, I think this is a cyclical situation, because in the past, there were still many VC tokens that performed well after being cleared, and Sol is one of them.

Although the MEME token has the best growth rate at this stage, it cannot support the development of an industry. What is needed is still projects that bring value to the development of the industry. Strictly speaking, the projects invested by VCs are not bad, but the bad thing is the pricing. What needs to be done in this round is to redefine the price of those valuable projects.

The biggest problem for retail investors when participating in VC projects is how to get lower costs. There are two ways to do this: one is the low price that appears when the overall market is oversold, and the other is the low-cost chips from airdrops. In most other cases, VC tokens are not worth investing in.

Finally, I would like to emphasize again that both MEME and VC tokens are short-term projects. Both have the opportunity to make people rich quickly, but the probability of MEME is low, the opportunities of VC tokens are few, and there are systemic risks.

If you want to play hard, you must first carry Bitcoin for self-defense. The next copycat market will not be peaceful.