On the surface, the reason why altcoins cannot take off is that the speed of new funds entering the cryptocurrency circle cannot keep up with the speed at which market makers and exchanges make money. Most ordinary users have a three-month liquidation period for contracts. After retail investors’ positions are liquidated, their funds are taken away by institutions and exchanges. Retail investors cannot keep up with the speed of attracting new investors.
1. The trading technology of ordinary users is still based on various K-lines and indicators. This technology is equivalent to the stock era in 1995 and is very backward. Institutions have evolved to order book technology. This is a new technology developed in 2014, which beats the K-line school 20 years ago. It is equivalent to driving a bomber to fight cavalry, so in contract trading, ordinary retail investors usually survive for about three months.
2. Regarding the spot market of the cryptocurrency circle, the liquidity is very poor, and institutional traders even directly control the liquidity of some coins. The reason for this situation is: CZ was controlled. When CZ was controlled, the United States revealed that more than 200 market makers were related to CZ. With CZ being controlled, the cohesion of the market makers related to CZ was broken up. Without a soul figure like CZ to organize 200 market makers to jointly make markets, the market's "ability to make trouble" could not be exerted. In simple terms, the institutions that were originally capable of making trouble in the bull market were divided because of CZ's incident, and they could not gather together to make trouble and create hot spots. As a result, the market was not hot enough, which indirectly led to insufficient new attraction. Further led to weak liquidity.
3. The approval of ETFs has resulted in new funds that were originally intended to enter the cryptocurrency market being deposited in the U.S. stock market
4. The cryptocurrency circle lacks innovation at the grand narrative level, and at the same time, the encryption track has attracted some developers and traffic from AI.
5. The listing fees of some exchanges are too high. Many project parties and VCs do not actually make any money. Many project parties cannot earn back the listing fees even if they pay to be listed on the exchanges, and retail investors also lose money.
In short, those who work in VC agencies said that many VC agencies have gone bankrupt, especially Chinese VC agencies, which are at a disadvantage in global competition. They cannot invest in high-quality projects, and second-rate projects are locked up for several years and still go below the issue price.
In VC's observation, the weakness of the crypto market is mainly due to weakened liquidity and weakened ability to attract liquidity.
If we want to change the current situation, we have to wait until the Federal Reserve releases liquidity before things can get better.
