Market issues and opportunities, how to respond to the current market?

Source: Talking Li and Talking Outside

In the series of articles from a few days ago, we continued to discuss the market situation through various on-chain indicators, including Supply LTH and STH, Percent Supply in Profit, Open Interest, Funding Rates, Stablecoin Inflows, etc.

At the end of the previous article, I briefly mentioned my upcoming operational plan again, and some partners left comments asking: I currently have a position of 500,000 USD, mainly in SOL, with an average cost of 110 USD. You mentioned in your article that mainstream altcoins like ETH and SOL might still have 1-2 times the potential this year. Should I continue to hold my coins and bet on the possible altcoin season in the second half of this year?

Such questions may need to be viewed on a case-by-case basis:

If the market develops smoothly in all aspects, we believe that SOL still has a chance to see around 400 this year. However, whether to hold on and continue to bet on the possible altcoin season in the second half of this year should still depend on one's own risk preference.

Opportunities will always exist, and risks are everywhere. Money can never be fully earned, but it can be completely lost. Here, we reiterate our previous viewpoint: during a bull market, the most important thing is to prioritize protecting your expected returns rather than continuing to hold profits and trying to take on greater risks.

1. Bitcoin and Altcoins

Let's return to the market situation.

From the price performance perspective, BTC seems stronger than ever, and this strength is not only based on so-called positive narratives or news but also on the growing long-term bullish belief that more and more people are developing towards BTC.

This can actually be seen from some other dimensions of data. For example, looking at the Bitcoin Exchange Balance, as of May 27, the BTC balance on centralized exchanges has dropped to its lowest point in three years (2.14 million BTC), as shown in the figure below.

This usually indicates that long-term holders are accumulating, and this situation is not merely a simple price speculation; it is certainly also a result based on some long-term belief background.

Moreover, from the Coinbase Premium Index, this index has recently turned positive again, indicating that there is significant buying power in the U.S. market, suggesting that the enthusiasm of U.S. investors seems to be returning. This is actually a relatively good short-term bullish signal, reflecting the optimism of U.S. institutions (and retail investors) and the inflow of funds from the U.S. market, as shown in the figure below.

In summary, Bitcoin remains Bitcoin; it has not changed. However, with the unlimited printing of fiat currency globally, Bitcoin seems to be slowly and quietly becoming a new reservoir target (investment or speculation target), and in recent years, it has also become a long-term betting target for many traditional large companies.

Compared to Bitcoin, the price speculation of altcoins is much more apparent, and most altcoin projects do not have any belief support (or have not established it). The only belief is merely the temporary frenzy brought about by a few big bullish candles, and this sentiment is more evident in the case of MemeCoins.

Although many altcoin projects, apart from MemeCoins, have corresponding products as support, these altcoin projects and the tokens they issue seem to be two completely different concepts. They are either garbage products based on open-source or forks, merely accompanied by some seemingly high-end marketing copy, or the tokens issued are simply designed to extract more retail investors' money. For instance, some altcoin projects claiming to be AI-based have a few hundred million dollars in FDV and fabricated user data in the hundreds of thousands or millions, but the purpose of launching these tokens is actually designed for insiders (or related parties) to exit liquidity. They repeatedly use AI narratives for speculation, continuously harvesting ordinary users' funds.

However, the current market is like this, as there are still no clear regulations or laws to restrict these behaviors. Therefore, for ordinary investors, there are both significant speculative opportunities and very high risks. This may be the main reason why people (retail investors) later prefer to play with various MemeCoins; at least most MemeCoins appear to be fairly launched. This is not only due to negative sentiment but also a structural issue faced by the crypto market itself.

As for whether this issue can be resolved or when it will be resolved, we do not know. The only thing we can do is to grasp some speculative or investment opportunities based on our own risk preferences. If you are unsure but still want to participate in the crypto market, the simplest strategy remains: just choose BTC directly. This is the simplest and least error-prone investment path.

2. Changes and Issues in the Market

I remember mentioning this viewpoint in previous articles: the current market seems to have undergone significant changes in many areas, and some historical experiences, indicators, and strategies seem to have begun to become ineffective or difficult to adapt to the new market.

Many diamond hands and old retail investors do not seem to have achieved the desired success and results in this cycle; instead, some new players have emerged with significant results. Of course, those who achieve significant results are just a rare few; more new players are actually liquidity providers.

Now, CEX is doing what DEX does, while DEX seems to want to directly overthrow CEX. The once-popular airdrop strategy seems to be less and less sought after, as more and more scams and counter-schemes have dampened people's enthusiasm. People are starting to turn to focusing on earning Alpha points for airdrops. USDC and USDT continue to create record increases, but many funds still seem to be in a wait-and-see attitude. Various new projects are either busy issuing tokens to make a quick profit or have paused their token issuance plans and chosen to lie flat and wait for opportunities. And so on…

Thus, the market has slowly transformed into an interesting polarization: more and more people are beginning to believe in Bitcoin, while more and more people are starting to see altcoins as scams.

This result will lead to the already limited liquidity increasingly tending to flow towards Bitcoin, while the rotation of altcoin sectors becomes faster (shorter time) and more intense. The entire market no longer pursues any real internal innovation; it seems that everyone is thinking about how to make money quickly. However, one thing remains unchanged: the majority of those ultimately hurt are still retail investors.

3. Issues and Opportunities in Altcoins

In other words, this cycle not only sees altcoins lagging behind Bitcoin overall, but also many people no longer have any long-term confidence or belief in altcoins.

When the market returns from prosperity to calm, only those altcoin projects with real products, capable of generating genuine and sustainable returns, will re-emerge with their inherent value.

For example, AAVE and PENDLE, which we discussed in previous articles, belong to this category. When the market is crazily speculating on MemeCoins, AI, and other concepts, they often do not attract much attention from most people. However, when the market enters a relatively calm phase, these projects may achieve some breakthroughs (for instance, in price performance) and come into people's view, as the driving force behind such projects is more about the alignment of their products with market development rather than just various superficial slogans and exaggerated marketing speculation.

In the future, we may continue to see various narratives being speculated and prices being driven up. We may continue to see various so-called new concepts emerging under the banner of innovation. We may also see various new projects aiming to overthrow certain entities… But from a longer-term perspective, if a project or ecosystem does not have a solid product foundation to support it, then after a brief peak, what remains is likely just a mess.

In this case, the funds that have been briefly speculated will also have to choose to return to Bitcoin. Therefore, the only people who seem to be able to make money in the market are these few types:

• Those who persistently focus solely on BTC investment

• Those who conduct in-depth research and focus on ambushing altcoin projects with long-term fundamentals

• Those with keen information or data sensitivity, able to grasp short-term speculative opportunities in the market in advance

At the same time, timing is crucial, position management is also important, and mindset matters.

In fact, regardless of how the market develops and changes, if we look at the problem from another angle, the market itself is not wrong. We need to learn to adapt to the constantly changing or evolving market rather than expecting the market to adapt to us. If a person does not have enough respect for the market, then sooner or later, the market will make them aware of their ignorance.

4. How to Respond to the Current Market

……To be continued, we will continue to supplement and update the remaining content through Talking Li and Talking Outside.