Analysis of ETH weakness, SOL status and the future of altcoins
Reasons for ETH weakness
Some people in the market attribute the weakness of $ETH to the development path of the Ethereum Foundation (EF), EF taking the lead in dumping the market, V God being approached by villains and even V God having a girlfriend, but these are not the main reasons. The main reason is that $ETH failed to become the entry chip in this cycle, and $SOL took over its role. When the on-chain meme fades, $SOL will also face the same problem as $ETH, that is, where is the new growth point, and what new narrative can bring "real" buying to digest the long-term huge selling pressure brought by POS.
Relationship between narrative and buying
Taking the example of Polymarket <span Polygon and the continuous decline in the price of DeFi governance tokens in this cycle, there is no real buying, and no matter how good the narrative is, it has nothing to do with the price of the currency. After a round of disenchantment, OTC funds no longer simply pay for narratives. In contrast, although AI narratives are grand and have room for imagination, the only advantage of crypto is that the regulation is vague and it is convenient for the main players to cut leeks.
Factors that will help altcoins return to glory
If altcoins want to return to glory, there are two key factors:
1. Real buying: The "real" buying brought by narratives is very important. Although the on-chain memes have made $SOL's rise amazing, none of the leading narratives are related to chips. The closer crypto is to real applications, the more it is separated from the essence of casino chips, and the more difficult it is to drive the price of the currency.
2. US dollar liquidity: The current US dollar liquidity is far different from that in 2020-2021. At that time, the Fed rapidly expanded its balance sheet and the interest rate was close to 0. Now it is shrinking its balance sheet and slowly lowering interest rates. The inflow of OTC funds into the currency circle is limited, and even if there is, BTC will take up the most.
Capital is profit-seeking, and altcoins are mostly regarded as "air". The rise of memes in this cycle is the result of market funds voting with their feet. I won't say much, I'm afraid of being misunderstood as shorting. I followed the market in Q4, and finally remembered to wake up and exit consciously.
