GuShiio.com History shows that extreme sentiment in markets is often a precursor to major turning points.
Author:Axel Bitblaze
Compiled by: Shenchao TechFlow
The retail market is in a downturn, sentiment has hit rock bottom, and shanzhai has continued to fall for months, but this may be a prelude to a new round of opportunities.
Although market conditions may seem bad, I think this is more like a layout than an end.
As key catalytic events emerge, I believe the next round of market gains will be dominated by utility coins, not Meme.
Here are my views and when this change may occur.
Since December 2024, investors ‘patience for the copycat season has been exhausted.
Starting from the fourth quarter of 2024, the market has actually welcomed a lot of good news, but the altcoin market has never been able to respond positively.
Currently, market sentiment appears to be in a depressed phase, with retail investors and large money holders (whales) selling off.
Does this mean that the copycat season is just a gimmick?
Will this market cycle end without ETH hitting a new high?
Are there any positive factors that can drive funds into the altcoin market?
Next, let us start analyzing from the positive factors and the timeline of the shanzhai season.
1. FTX payouts: A new variable in the market
Previously, I once thought that FTX’s compensation would be like Mt. The Gox incident has also been delayed for many years. But facts have proved that this process is accelerating.
Starting from February 18, 2025, FTX will launch the first batch of payments, with a total amount expected to be between US$7 billion and US$8 billion, mainly in the form of stablecoins.
What does this mean for the copycat market?
First, most traders in FTX are investors with high risk appetite, and they mainly hold altcoins in their portfolios.
Secondly, current market data shows that most altcoins (including ETH) are seriously undervalued compared to BTC.
Looking back at the market situation at the time of the FTX crash, the price of BTC was about $16,000, the price of SOL was about $20, and the price of ETH was around $2,500.
Today, as money flows back into the market, many investors will reassess the current market environment and realize that ETH is undervalued.
In addition to ETH, there are many altcoins whose gains from the bottom of the cycle have significantly lagged behind BTC.
Coupled with the U.S. government’s increasingly friendly policy environment towards cryptocurrencies, I believe that most of this money will flow into the altcoin market, especially those with practical application value, rather than Meme, which relies solely on hype.
2. ETH ETF pledge function: new attraction of institutional funds
ETH holders have long been looking forward to applications related to the ETH ETF pledge function. Now, this process has finally begun.
In the past three days, Grayscale and 21Shares have filed applications with the U.S. Securities and Exchange Commission (SEC) to allow their Ethereum ETF to pledge their ETH holdings.
Although BlackRock has not yet submitted a similar application, I expect this to happen in the next 23 weeks.
Currently, institutional investors have limited incentive to choose ETH ETFs over BTC ETFs. However, once the pledge feature is approved, the ETH ETF will be able to provide an annualized return of 3% 4%. For traditional financial institutions (TradFi), such yields are undoubtedly attractive and will attract more institutional funds to flow to the ETH market.
3. The decline of the Federal Reserve’s Reverse Repo Facility (RRP): An inflection point for market liquidity?
The Federal Reserve’s Reverse Repo Facility (RRP) is an important tool for regulating liquidity in the financial system. When the RRP balance falls, this usually means that excess liquidity is decreasing.
This phenomenon usually occurs during the Federal Reserve’s quantitative tightening (QT) process by shrinking its balance sheet, and this is happening right now.
So far, the Federal Reserve’s RRP balance has dropped by $2.5 trillion from its peak and returned to its April 2021 level.
What does this mean for the market?
The end of quantitative tightening (QT) seems to be in sight.
It is worth noting that during the period when the Federal Reserve implemented quantitative tightening, there was never a copycat season.
4. Regulatory breakthrough in altcoin ETFs: A new dawn?
Since January 20, 2025, the U.S. Securities and Exchange Commission (SEC) has begun working with issuers of altcoin ETFs.
In the past few days, the SEC has formally accepted spot ETF applications from XRP, DOGE and SOL.
While this does not mean that the applications will be approved, it suggests that the U.S. altcoin market may be on the verge of a clearer regulatory environment. This will play a positive role in restoring market confidence.
5. The deterioration of market sentiment: crisis or opportunity?
Current market sentiment is at a low point:
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Competition between developers and project founders is becoming increasingly fierce.
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Supporters of ETH have even begun to remove their.eth logos to show dissatisfaction with the market.
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Bitcoin supporters are selling spot BTC and buying ETFs.
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Some countries have even begun issuing Meme to cash out hundreds of millions of dollars from retail investors.
Against this backdrop, shanzhai trading performance has been sluggish, as if the market is experiencing a huge crisis of trust.
However, history shows that extreme sentiment in markets is often a precursor to major turning points.
After the Luna and FTX crashes, market sentiment is now even lower
As a crypto industry practitioner who has experienced the Luna crash and the FTX crash, I can say that the current market sentiment is even worse than it was then.
Currently, 99% of retail investors ‘portfolios have either returned to zero or have dropped 90% or 95% from their peak.
This is a typical signal of market surrender.
The price level sell-off has been completed, and now the market is experiencing a surrender of time, when investors lose patience due to long-term losses.
Despite this, many people ignore a series of positive changes taking place in the industry because of excessive losses, including:
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Abu Dhabisovereign wealth fundsMass purchases of Bitcoin (BTC) are being made.
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A number of banks in the United States are preparing to launch cryptocurrency custody services.
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Goldman Sachs has invested billions of dollars in BTC.
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The United States is expected to launch a cryptocurrency regulatory policy in the next 6090 days.
In addition:
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Trump’s companies have announced plans to buy BTC and other crypto assets.
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World Liberty Financial is continuing to use the time-weighted average price (TWAP) strategy to buy altcoins.
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More than 22 U.S. states have submitted bills to include Bitcoin in state reserves.
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Companies such as GameStop plan to include BTC on their balance sheets.
These positive factors may become important driving forces for the next round of cryptocurrency rise.
Prediction of recovery time for the altcoin market
Currently, most tariff-related FUD have subsided or been postponed until 12 months later.
The main concern in the current market is that rising inflation may force the Federal Reserve to adopt a more aggressive policy of raising interest rates. However, I don’t think this is likely to happen because the Trump administration is continuing to call for interest rate cuts.
The next FOMC meeting will be in March, and I expect the rise in the altcoin market to start before then.
Another reason to support a rebound in altcoins before the end of February is that investors ‘patience with the Meme scam has run out and they are likely to divert money back into altcoins with practical uses.
Although this shanzhai season may not be as large as its peak in 2017 or 2021, it may last for 68 weeks, forming a local high similar to the first quarter of 2024.–
My summary and suggestions
Meme’s excessive hype has indeed delayed the arrival of the shanzhai season, but as the bubble in the Meme market bursts, the next round of shanzhai growth may exceed its performance in the fourth quarter of 2024.
Since the market crash in February, I have been actively deploying altcoins that have practical uses because I believe the market is about to reverse.
If there is one piece of advice for investors, it is:Instead of chasing those seemingly shiny new Memes, focus on accumulating altcoins with real-life application scenarios and powerful network effects.
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