Altcoin investment guide: From “mine disaster ruins” to “gold veins”

There is nothing new under the sun, and the first principles of investment are always liquidity and cheapness.

Author: Metrics Ventures

In the deep winter of 2018, I inspected a photovoltaic power station in the Gobi Desert of Qinghai. In the cold wind of minus 20 degrees, the chief engineer pointed to pieces of photovoltaic panels that had been shut down and said: These are the legacy of the last round of expansion. New technologies will not break ground until the market is cleared.” quot; Looking at the Binance altcoin list at this moment, those K-lines that have been in a row for a long time are surprisingly similar to photovoltaic panel arrays back then.

The encryption market is experiencing a cycle that is no different from traditional industries. Like the 2012-2016 photovoltaic industry knockout, the CEX altcoin market has entered a cruel clearing stage: the daily transaction volume of a large number of 2021 star projects has fallen below 10 million US dollars, and the median FDV has evaporated by more than 70% from the peak. This is just like the trajectory of photovoltaic, Internet, and coal giants falling from 100-yuan stocks to fairy stocks.

But the cruel back of the cyclical law always hides generous gifts. Just as LONGi is betting on monocrystalline silicon technology at the industry’s freezing point, the darkest moment of the current altcoin market is giving rise to breaking momentum:

1. Restructuring of valuation logic: VC’s paper wealth and leverage strangulation

At the peak of the bull market in 2021, primary market VCs are like speculators frantically hoarding coal:

• valuation bubble: Venture capital (VC)’s median valuation of seed round projects reached US$82 million (Messari’s 2022 annual report), which is 16.4 times higher than the 2017 cycle (compared with only 5 million for similar projects in 2017), resulting in the token being overdrawn when it was launched on CEX. 10 times space;

• lever explosion: Institutions such as Genesis provided 100% LTV BTC mortgage loans in the last cycle, creating an arbitrage cycle: institutions mortgaged BTC to obtain stablecoins and allocate high tokens. Bankers can mortgage BTC to buy altcoins, creating false prosperity. However, with the explosion of Genesis in 2022, the value of collateral broke through the liquidation line in 2022 and triggered chain liquidation. This capital blood transfusion tube was cut off, and the altcoin market became a slaughterhouse for selling junk stocks in the primary market.

2. When clearing is in progress: The clearing cycle of the encryption industry is always faster than that of the industry

After two years of reshuffle, the market signals we can already observe are:

• Market sentiment bottomed out: The average market value of CEX altcoins has nearly dropped to 2020 levels, and the market value of multiple projects listed in 2022-2024 has shrunk by more than 80%; the retail exit rate has reached a historical peak, and the 90-day activity of retail coin-holding addresses has dropped to 12.3%(Sanwww.gushiio.comnt), close to the historical freezing point; the CEX altcoin Fear and Greedy Index has been below 20 for 15 weeks, reaching the freezing point since March 2020;

• The birth of a new track: Although traditional market makers have shrunk, new mechanisms such as mother-daughter coins and on-chain dex pools to lock in liquidity are rebuilding the leveraged flywheel channel. AI and Crypto, compliance and Crypto are trying to breed new industrial momentum.

conclusion: The current altcoin market is very similar to the rapid clearing of coal stock production capacity around 2015. The market popularity is declining rapidly. Bad news can no longer trigger industrial fluctuations. It is also facing the blood intake of the Alternative Sector (DEX) in the eyes of the whole market., but there is nothing new under the sun. The first principle of investment is always liquidity and cheapness. There are gold mines that have been mistakenly killed hidden in the ruins. We believe that high-quality projects will only wait until the industry is cleared.

Hidden war for altcoin funds: CEX valuation enters a turbulent bottom-finding stage, the dawn of DEX’s new world

1. CEX dilemma: VC poison pill is not eliminated, cleared and entered the second half

Altcoins on centralized exchanges are essentially the successor of the primary market valuation bubble:

• Competition for pricing power: In 2021, VC invested in projects with a valuation of 1 billion yuan. Now, the secondary market only recognizes a market value of 100 million yuan, and the middle 900 million yuan has become a valuation gap (case: a project has a seed round valuation of 200 million yuan, and the market value of circulation after the launch of currency security is only 40 million yuan);

• Capital barrier lake: BTC ETF brought in US$17 billion in incremental funds, but due to tightening risk control, market makers were unable to leverage through mortgage BTC as in the past. Funds were stranded in new trading venues. CEX altcoins became a dry river and entered a negative feedback loop for losing money effects.

2. DEX breaks the game: the secondary pricing power revolution

• traditional path: Retail investors on the VC pricing exchange accept the offer

• Valuation inversion: On DEX, retail investors can buy fully circulated tokens at a price of 1/10 of VC

• Valuation restructuring mechanism: The DEX market achieves price discovery through the AMM algorithm, and the listing premium rate of typical projects is 73.5% lower than that of CEX (Dune Analytics);DEX bloodsucking CEX liquidity is giving rise to a new paradigm of asset pricing: Community consensus DEX liquidity proves that CEX is passively invested.

• Consensus fission: When niche concepts (such as AI Agents) become public consensus through community communication, the circulation of chips is upgraded from Zhuang and Dispersion Mutual Separation(PvP) to incremental influx (PvE). Typical case:

  • Virtual: From the popularity of the DEX small circle to being included in the watch list by Grayscale, the market value has increased 20 times in three months;

  • AI16Z: The community imitates a16z to invest in logical packaging projects to attract funds from traditional technology circles.

core logic: CEX is a way for state-owned enterprises to dump their burdens, DEX is a way for private enterprises to bail out the market through policies such as backdoor listings, and the latter relies on mass movements.

CEX vs DEX: Two survival rules, two types of wealth codes

1. CEX strategy

• Pick up cigarette butts: Only buy projects with a market value of 50 – 200 million, real products and communities, and the project party has core pricing power, and avoid fairy stocks (average daily turnover is US$1 million);

• Waiting for the industry cycle: Referring to the history of coal stocks, in the 2025-2026 layout, the liquidity easing cycle will wait for the market value to return to the cycle to cash in the earnings and seize the core target of the industry trend (case: buy MKR for US$200 in 2020 and sell US$6000 in 2021);

• Liquidity arbitrage:In continuous market conditions, fully tradable tokens often show linear changes with the support of liquidity from different CEXs. In the emotional freezing point, there are often mispricing opportunities in the market value range, which can be used for liquidity and emotional arbitrage. At this moment,We believe that ETH has significant opportunities for mispricing games while enjoying the liquidity of the US dollar system connected to Bitcoin.

2. DEX Strategy

• Early sniper：

  • 500-2000 Ten thousand market value: Focus on the team background, Github code/product quality, chip acquisition/signal distribution;

  • 2000-5000 Ten thousand market value: CEX listing expectations (for example, after a DeFi project is included in the watch list by Binance, the price of DEX will increase by 300% first);

• Community empowerment: Observing the consensus construction of Meme coins, taking the AI Agent track as an example, for every 1 unit increase in the token SocialFi index (social platform mention frequency/circulation market value), it corresponds to 47.8% excess return (LunarCrush data), capturing the key turning point of PvP to PvE;

conclusion

At the Qinghai photovoltaic base in the dusk, a new generation of double-sided modules are storing energy in the sunset. The altcoin market is a huge gold mine, but most people come in with gold dreams and go out with gravel.

The cyclical gears of the encryption market have never stopped rotating, and those projects that sharpen weapons in the cold winter will eventually reflect the brightest light at the dawn of liquidity. All we have to do is calibrate the compass when others abandon the pit like senior miners, and prepare enough ammunition before the industry wakes up. Only by combining the patience of coal diggers, the ruthlessness of gamblers, and the computing power of accountants can real gold be dug out of the ruins. Remember: The bull market is a stage for cashing in profits, the bear market is a battlefield for collecting chips, and now is the golden moment to pick up the baskets and bow your head to pick up mines.We are firmly optimistic about the ETHBTC exchange rate and trading opportunities at this moment and the opportunity to build a gold position in the next year.

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