Crypto Assets Market Trend Analysis and Outlook

During the weekend, I took some time to reflect and couldn't help but have some new thoughts about the current market.

The true direction of the Crypto Assets market may not become clear until after September. Considering macroeconomic headwinds, insufficient summer liquidity, and position adjustments at the end of the quarter, market dynamics may only truly emerge after the August holidays. Recent market activity indicates that the rise of most small coins is mainly due to short squeezes. Traders, influenced by previous rebounds, blindly chase prices but lack support from long-term holders. Unsurprisingly, most of the tokens that surged experienced a subsequent decline of equal magnitude.

Ethereum rebounded unexpectedly, with AI-related tokens and other sectors that were previously hit hard leading this round of rebound. In contrast, tokens with practical use, solid fundamentals, or buyback mechanisms have shown strong resilience, being more stable during the downturn and recovering faster. From this, 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 the capital supporting BTC is fundamentally different from previous periods, which is why large-scale BTC liquidation is unlikely to occur unless influenced by macro events.

2. The internal differentiation of small coins intensifies.

Funds will eventually flow back to the small coin market, but it will not be fully rolled out. Only tokens with clear purposes and practical application scenarios are likely to attract these funds. This is why Ethereum may outperform other public chains. Regulatory clarity, increased usage of decentralized finance, deflationary structure, and staking demand together create a strong virtuous cycle. In addition, due to ETH's long-term failure to meet expectations, there are still potential buyers waiting for opportunities in the over-the-counter market.

3. Tokens supported by venture capital have structural risks.

Token unlocks will continue to exert pressure on prices. In the case of insufficient liquidity, the ongoing selling pressure from validators and early investors limits the upside potential. This is also why high-valued tokens listed on centralized exchanges may perform poorly in the future.

4. The advantages of popular coins are gradually diminishing.

Although popular coins have some structural advantages, such as no risk investment unlocking pressure and fair distribution, they completely rely on attention. However, this phase seems to be coming to an end.

The issuance events of some emerging tokens may mark the peak of attention for popular coins. After that, market interest in such coins begins to wane. Even during the rebound in April, the performance of certain public chains was not as good as Ethereum.

Some popular coins may still perform well, especially those that have gained popularity through promotion by well-known figures on platforms outside the Crypto Assets sphere (such as short video platforms or image social platforms). These may still bring about a wealth effect. However, the era of relying solely on cute images of coins as investment opportunities is over. Only those coins with strong story backgrounds and market recognition have real speculative value.

Interestingly, the market's fatigue and skepticism towards venture-backed tokens have created opportunities for fairly distributed Web2/3 projects, which could become the source of the next wave of wealth growth. However, seizing these opportunities requires active participation in on-chain activities. Whenever information asymmetry exists, significant opportunities tend to arise. Once everyone is aware of a particular opportunity, its returns are no longer substantial.

5. Future Market Trends

If popular coins are no longer the main opportunity, then what is the next focus?

My point of view is: the combination of artificial intelligence and Crypto Assets.

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

As the profits from popular coins decrease, market attention will naturally shift to new narratives. AI, with its clear practicality, is likely to become the next hotspot.

Many AI and Crypto Assets combined projects adopt a fair distribution model, echoing the narrative of the aforementioned successful cases.

This is why I have recently spent time researching and laying out plans in this field. There is no need to rush to establish a full position right now, but I believe that if the market rises strongly again, this field will contain the greatest potential opportunities.