Reflection and Outlook on the Crypto Market

The weekend gives people more opportunities to reflect. I want to share some views on the market.

The true direction of the crypto market may not become clear until after September. Considering factors such as macroeconomic resistance, insufficient liquidity during the summer, and quarter-end position adjustments, market dynamics may only manifest after the August holidays when participants return to the market. Recent market activities show that the rise of most small coins is mainly due to short covering. Traders, influenced by the previous rebound, are chasing prices, but there is a lack of support from long-term holders. Most people have already been frustrated during the previous market turmoil. As expected, most tokens that surged sharply subsequently experienced a corresponding decline.

The rebound of Ethereum was unexpected, with sectors that previously performed poorly, such as AI-related and certain cryptocurrencies, leading the rebound. In contrast, tokens with real utility, solid fundamentals, or buyback mechanisms demonstrated resilience, remaining more stable during the downturn and recovering more quickly. Syrup, Hype, and AAVE are excellent examples. Although SPX falls under the category of cryptocurrencies, its structure is unique. From these phenomena, we can draw the following insights:

1. The demand for Bitcoin is real and enduring.

Traditional capital is gradually entering the market through regulated channels such as ETFs.

The nature of capital supporting BTC is significantly different from previous years. This is why large-scale BTC liquidations are unlikely to occur unless influenced by macro events.

2. The differentiation among small cryptocurrencies has intensified.

Ultimately, funds will flow back to small tokens, but it will not be widespread. Only those tokens with clear use cases and practical application scenarios are likely to attract investment. This is why I believe Ethereum will outperform other public chains. Clear regulations, increased usage of decentralized finance, a deflationary structure, and staking demand together create a strong positive cycle. Moreover, because ETH has not met expectations for a long time, there are still potential buyers waiting off-exchange for the right opportunity.

3. Tokens supported by venture capital face structural risks

Token unlocks will continue to put pressure on price trends. In the case of insufficient liquidity, the ongoing selling pressure from validators and early investors limits the potential for price increases. This is why I believe that tokens listed on centralized exchanges with overvalued valuations have a bleak future. Tokens from certain ecosystems, in particular, face ongoing selling pressure stemming from their validator reward structures.

4. Geng Coin has structural advantages.

Geng Coin has structural advantages, with no venture capital unlocking pressure, a fair issuance, and is completely based on attention. This is a pure hype mechanism, functioning much like it did in early cycles.

But I think this stage is coming to an end.

Certain token generation events and the launch of specific coins mark the peak of attention towards those coins. After that, interest in the coins begins to fade. Even during the rebound in April, the performance of certain public chains was not as good as Ethereum—if everyone already holds them, who will be the marginal buyer when the momentum of the coin weakens?

Some cryptocurrencies may still perform well, especially those that have gained popularity through influencers on social media platforms outside of the crypto space, such as short video platforms or image-based social platforms. These may still bring about asymmetric wealth effects. However, the era of "cute animal coins" as alpha has ended. Only those cryptocurrencies with strong narratives and distinct market recognition possess true speculative value.

Ironically, the fatigue and skepticism towards venture-backed tokens have opened the door for fair launch Web2/3 projects, which will become the next wave of wealth creation opportunities.

Some projects are great examples. But to seize these opportunities, you need to be active on the chain. When there is information asymmetry, big opportunities always arise. Once everyone is aware of something, it no longer yields returns.

This is why I focus more on the on-chain market. The success of certain projects has sparked the desire to seek the "next opportunity," and capital has started to chase similar fair launch narratives for small coins. Just like someone earning tremendous wealth through trading coins—attention guides capital flow.

5. Future market trends

So, if meme coins are no longer where the opportunity lies... what will come next?

My view: The combination of AI and encryption.

If you have been following my updates, you would know that most of my operations during this cycle—after the early stages of certain public chains and venture capital-backed tokens—have focused on coins and AI.

Just like the hype around decentralized finance, most early AI projects failed after the speculation. However, truly practical projects are quietly being built during this bear market. We have already seen some of these projects emerging on-chain.

As the profits from cryptocurrencies dwindle, attention will naturally shift to new narratives. AI, with its clear practicality, is well-suited to become the next focus.

Many AI x encryption projects adopt a fair launch model, echoing the narrative of certain successful projects.

This is why I research and lay out in advance in this field during the calm periods of the market. There is no need to rush to establish a full position now — but I believe that if the market rises strongly again, this field will hold the greatest asymmetric opportunities.