I. The Logic of Market Speculation:
In a bull market, the recognized logic of speculation in A-shares is for brokerage firms to lead the way in driving up prices, followed by high-quality blue-chip stocks such as insurance and real estate, with steel, coal, and non-ferrous metals joining the dance. Lastly, there is the frenzy of thematic stocks, with a flood seeking undervalued opportunities, thematic plays, and penny stocks soaring. Towards the end of the bull market, opening an account requires connections, students no longer want to attend classes, the working class avoids going to work, and security guards and middle-aged women start sharing stock trading experiences. Listed companies engage in crazy private placements and reductions, investors mindlessly chase the market, and after the frenzy, all that’s left is a mess…
Looking back at the crypto bull market of 2021, it has a similar flavor. It started with the narrative of the DeFi Summer, with TVL doubling and driving up Uni and Aave prices. This was followed by a unilateral uptrend in Btc and Eth, during which almost all themes and narratives saw a round of significant increases, ranging from multiples to tens or even hundreds of times. In the later stages of the bull market, the crypto market witnessed the rise of the Meme sector. After the Meme boom, the rise of new narratives represented by chain games and the metaverse, such as Axs and Sand, led to market speculation. Following the speculation, the market went through adjustments influenced by various factors, never to return to its previous state.
Comparing bull markets in different fields, we find that the core logic is to first speculate on assets with high certainty and value, followed by speculative sectors and tracks with narratives and hot topics, and finally junk coins, air coins, and meme coins. However, with the rapid development and iteration of blockchain, new narratives and tracks have emerged over the past three years, such as Ethereum Layer 2, re-staking, rune stones, AI, etc. These narratives will eventually replace the old narratives of the previous bull market. Therefore, from the perspective of themes, it is difficult to summarize patterns and determine which stage the current market has reached or what cycle it is in. Hence, we can summarize patterns based on market capitalization.
Core assets (BTC and ETH) – High market cap – Mid market cap – Low market cap – Meme – NFT/other
II. Changes and Differences in the Current Bull Market:
So, have you made money in this bull market?
Do you find that the capital efficiency is insufficient, and the sectors you favored have experienced significant pullbacks?
Are value coins unable to keep up with MEME coins? Are the returns slower than those from trading dog coins?
Despite GameFi data hitting new highs and continuous financing, are you unable to cash in on popular items?
The most direct feeling this bull market gives is the lack of liquidity, poor profit-making effects, and no state of all-around prosperity. Although ETFs have injected strong liquidity into BTC, this liquidity cannot spread to different sectors and tracks. While there are expectations of interest rate cuts by the Federal Reserve, it is still uncertain whether the hard-earned interest rate cut will significantly improve the current state of the crypto market. It is important to understand that the funds released by the interest rate cut may not immediately flow into the crypto market but might first fill the liquidity needs of the stock and real estate markets. Only after the liquidity spills over from these markets might it flow into the crypto market.
Therefore, in a situation of inadequate liquidity, coupled with ETF injections, an extreme situation arises where core assets rise while other market caps remain unchanged or even fall. MEME coins, influenced by short-term hot money sentiment, experience an uptrend. However, this kind of rise in the Meme sector is not necessarily sustainable in the long run and may only last for a few days or even hours, indicating another symptom of inadequate funds.
III. Summary:
The fundamentals of the market have changed compared to previous years, and the investment logic used previously needs adjustment and change. We believe that the core reasons for the poor profit-making effects of this bull market are the lack of funds and high valuations with low circulation. This, in turn, leads to poor performance of the secondary market transmitted to the primary market, compounded by the witchcraft situation and studio clusters in the primary market, further reducing profit-making effects.
We cannot provide an accurate answer to determine where the crypto market is currently heading, or whether BTC will truly break through a hundred thousand. However, the market issues that we have rationally analyzed are the most pressing problems to solve at present. Perhaps only after gradually resolving and changing these issues will the true crypto frenzy bull market arrive.
