By Metrics Ventures
Metrics Ventures, a secondary fund in the crypto market, released a summary of its September market observations:
1/ Recently, Bitcoin has been fluctuating between 50,000 and 60,000, and market sentiment is low. Trading volume has hit a new low in a single day, the fee rate has continued to be negative, and the Ethereum exchange rate has fallen below a new low again. The market has reached a freezing point. After the FOMC broke the emotional freezing point, the altcoin rebounded, but it was still driven by a chip vacuum, and the market trading volume remained sluggish.
2/ Continuing the analysis from last month, altcoins are generally in a consolidation phase after the pullback from the highs in March and April. However, the accumulation of time is crucial in the rules of chips, and we have not yet observed signs that altcoins are ready in batches. It is worth noting that many of the chips of the target failed to form an effective distribution and passively pulled back to the low point, which means that market makers still have the motivation to maintain prices or drive a rebound in the short window after the sentiment freeze. This may be a positive signal.
3/ From the current perspective, we believe that the international risk market has released risks for the first time since August. Although some altcoins have made good recovery trends this month, we believe that crypto assets still need time to accumulate strength. At present, the market will continue to be in a state of disorderly fluctuations. Looking ahead, we believe that the adjustment and accumulation this year will be a good foundation for the market next year, and there is no need to worry too much about the volatility of the market.
Inventory and comments on the overall market situation and market trends:
The market performance this month is flat, and the hype and duration are weaker than in early 2023. The market is once again widely discussing the blockchain native innovation represented by Ethereum and the problem of its penetration rate being blocked. From a certain perspective, the current sentiment is even more depressed than in 2019. As the sentiment has eased after the FOMC, some altcoins have made good recovery trends, but the market is still scattered and the trading volume is sluggish.
Looking back at the trend, Bitcoin has continued to fluctuate in a disorderly and wide range since April. This is mainly due to the simultaneous shrinkage of trading volume, market attention and risk appetite. It is worth noting that we are witnessing a disorderly and wide range of fluctuations close to a new high, which confirms our consistent view that we may be experiencing a unique cycle of major asset classes. From the perspective of altcoins, current market opportunities are mainly concentrated on chip games. This highlights the current lack of narratives and the weak endogenous driving force of the industry. Except for AI and Meme, there has been no obvious capital synergy and main narrative trend. As we mentioned earlier, the market's pricing model and gameplay transformation have gradually been recognized by more practitioners.
However, the characteristics of the reflexive market remain the same. If this trend continues, pure game driven by narrative and chips may reappear in the future, which will once again highlight the "casino" nature of the market. From the perspective of secondary market operations, the grasp of the escape window and the choice of escape posture become increasingly important.
Overall, our focus will continue to be on waiting. The wide range of fluctuations will eventually end, and the risk-return ratio of profiting through "selling high and buying low" will drop significantly. It is a wiser choice to stay focused on the market and do a good job of identifying the turning point after the market trough.
Industry development trends:
The primary market VC is experiencing a dramatic reshuffle, with small and medium-sized VCs being cleared out one after another, and the DPI of many projects is even less than 1. In contrast, the top VCs continue to grow and quickly completed a new round of financing in just 5 months. In the future, the primary market will show an extremely polarized development trend. In addition to the top VCs, only incubators that focus on early projects and have unique tastes, or vertical VCs that focus on specific ecosystems can use super-high odds and competitive advantages in vertical fields to find a living space in the market.
The most discussed application tracks are social finance (SocialFi) and artificial intelligence encryption (AI Crypto). There are hard barriers to AI implementation, and we need to wait for the critical moment of technological breakthrough. Pumpfun is the most successful SocialFi case, but the SocialFi that is truly suitable for Web3 is not the Web3 version of Twitter, but a socialized casino.
BTC, stablecoins/payments and casinos are the only proven business models in the industry. Stablecoins have become the new "volume king" track in the primary market, but no one can clearly explain how to break Tether's network effect. The development trend of the industry is becoming clearer and clearer. Except for BTC, the final business model of Web3 is casinos.
Quantitative returns continue to be under pressure, and many quantitative teams that have switched from A-shares are flocking to the crypto market. However, considering the overall size of the current quantitative market and the comparison with active trading liquidity, quantitative returns are expected to shrink further. At the same time, we should be wary of highly leveraged quantitative strategies, because in extreme market conditions, the risk of liquidation faced by these strategies is rising.
