Suddenly, it seems like all the negative news is coming at once.
The US Bitcoin spot ETF has seen outflows of over $1.2 billion in the past two weeks. The stablecoin market is no longer growing. The continuous capital pressure on miners after the halving has led to selling. The 140,000 BTC involved in the Meituandian incident are starting to be compensated, putting pressure on the market. After a round of speculation, AI concepts and meme coins are currently experiencing a pullback. Altcoins continue to be unlocked for bloodsucking, and the continuous listing of large new coins is also draining the market.
Institutional traders have shifted their strategies from arbitrage to caution, with whale trading volume decreasing by over 40% in the past two days. Whale traders on derivative exchanges are currently in risk-averse mode.
The biggest impact on market sentiment comes from the continuous unlocking of altcoins and the draining effect of the continuous high FDV listing of new coins. After all, the influence of ETFs on the market is no longer significant, stablecoins have not brought much net inflow of funds, and the market liquidity is relatively weak. In this context, the unlocking of altcoins and the draining effect of new coins are indeed causing significant pressure.
The industry’s ecosystem activities are currently at a standstill. Gas on the Ethereum chain often remains at levels of 2-3 Gwei, which is rarely seen in a bear market. There has been no major ecosystem landing in the industry so far, with everything still based on speculation and news.
In the first half of 2024, meme coins have outperformed significantly, with an average increase of about 18 times. Conversely, L2, which is considered the “best” in terms of technology and ecosystem, has performed the worst, with a drop of over 40% in an atmosphere of a bullish market. The reason for this is quite simple – meme coins have a small market value and are easy to speculate on, while institution-incubated projects generally have high market values and circulation, leading to continued unlocking and a lack of interest from investors.
The current market is likely presenting the greatest challenge in the history of the cryptocurrency market. The market is no longer following conventional logic. In a bull market, the sectors with the best technology and ecosystem are experiencing a sharp decline, while purely speculative meme coins are soaring, a phenomenon never seen before in previous markets. If the altcoin projects incubated by institutions continue to have high FDVs and ongoing unlocks without any explosive ecosystem developments, there is unlikely to be a trending bull market in the coming years. The market will likely continue to fluctuate between “falling after rising too much, and rising after falling too much.”
The current market now resembles Bitcoin becoming like stocks, while altcoins are becoming like A-shares.
For those in the industry, the core strategy for the future, until a major ecosystem emerges, is to hold onto BTC tightly. Dollar-cost averaging is the simplest approach. As for other coins, their speculative nature will become more prominent, so it’s important to quickly exit when market hotspots arise, without becoming attached.
In terms of external factors, the monetary policy of the Federal Reserve is the most influential. There is no need to expect interest rate cuts, as they will not change the current market situation. The key is whether the Federal Reserve will open the floodgates of money printing to stimulate the market once again.