GuShiio.com In this round of adjustment, Meme coins are undoubtedly the hardest hit area in this round of valuation.
Author: Currency market trader
On February 21, a black swan incident suddenly appeared in the cryptocurrency market: the Bybit Exchange wallet was hacked, resulting in losses of up to US$1.5 billion, setting a record for the largest security incident in history. Since the stolen crypto assets were mainly Ethereum and its pledged certificates, ETH plunged more than 5% intraday and dragged down the market.
Although Bybit, the party mainly responsible for the security incident, has announced that it will pay full compensation for users ‘losses, the impact of the coin theft incident on the industry and market has not yet ended.
First of all, whether Bybit has enough own assets to make up for the asset gap caused by currency theft remains an open issue. Taking Binance’s assets in January as a reference, its US$100 billion in customer assets corresponded to US$8.7 billion. Then Bybit’s US$15.7 billion in customer assets should correspond to US$1.37 billion in reserves. This means that the pressure to pay customers ‘assets in full remains huge. At present, whether it is filling the funding gap through internal fund allocation or external financing, Bybit needs to audit the asset status of the exchange and publicize the results in order to restore market confidence as soon as possible. Otherwise, Bybit may face the risk of a run again, triggering market panic.
Secondly, the main reason why the attack on Bybit wallet was successful was that the hacker obtained Safe.Global’s AWS S3 or CloudFront account/API key, thereby tampering with the front-end JavaScript files stored in the S3 and implanting malicious code targeting the Bybit cold wallet address. Many professionals believe that this security incident may involve the cooperation of spies. As one of the important multi-signature wallet service providers in the Web3 field, SAFE still manages more than US$100 billion in encryption assets, which has caused the market to have huge concerns about security risk spillover. In addition, when Bybit uses the external wallet system, it does not conduct secondary review of important transactions, and its awareness of security precautions is weak, resulting in a crisis of trust among users in decentralized exchanges. Therefore, it may still take a long time to resolve a series of problems caused by the currency theft incident and rebuild market confidence.
In addition to the concentrated outbreak of internal risks, the impact of macro risks is also one of the important reasons for the continued decline of the crypto market. Amid Trump’s fiscal spending cuts and wielding a tariff stick, U.S. stocks continue to be turbulent, with the median decline of the seven technology giants reaching 13% in the past week. This makes it difficult for the crypto market to enjoy the liquidity spillover from U.S. stocks. As a result, while U.S. stocks plunged, Bitcoin ETFs also suffered record outflows. Without policy benefits (State Reserve Bitcoin) or technological breakthroughs (fundamental improvements) as a hedge, the crypto market will continue to be under pressure from the decline of U.S. stocks.
However, despite the lack of motivation for innovation in the crypto market, the valuation of most application similar tokens is now below 80% of the historical quantile, and the price is still below 90% of the historical quantile, which means that the valuation of most projects has returned to the level it was when Bitcoin was US$15,500. Extremely low valuations have reflected depressed fundamentals in advance. In addition, despite the huge resistance to establishing a national reserve of Bitcoin, since last week, Trump has begun to fulfill his campaign promise to “reverse the SEC’s attitude towards crypto regulation.”
First, in the past week, the U.S. SEC dropped its lawsuit against Coinbase and terminated investigations into projects such as Robinhood Crypto, OpenSea, Uniswap Labs, and Tron. In response to the SEC’s abandonment of its investigation into Uniswap, Hayden Adams said that the SEC’s previous investigation lasted three years, wasted a lot of time and millions of dollars, and had a significant impact on the company. These human, material and financial pressures that have to be borne in litigation are not something ordinary companies can afford. This means that many small and medium-sized projects will basically close down once they are targeted by the SEC. With the end of the era of barbaric supervision, the living environment of blockchain projects will be greatly improved.
Secondly, President Trump will host the first White House Cryptocurrency Summit on March 7 and deliver a speech. The summit will be chaired by White House encryption director David Sachs and managed by Bo Hines, executive director of the working group. At that time, founders, executives, investors of well-known projects and members of the President’s Digital Assets Working Group will gather together. The goal of the summit is to develop a clear regulatory framework that promotes innovation and protects economic freedom. After the summit, Trump may sign a series of executive orders to promote the development of the crypto market. Although these policy benefits are difficult to reverse the market decline in the short term, the top-level design of crypto supervision and the acceleration of technological innovation will create favorable soil for a new round of bull market.
In this round of adjustment, Meme coins are undoubtedly the hardest hit area in this round of valuation. The two most typical representatives, Ai16z and TRUMP, have plunged 89% and 88% respectively in the past month. This also verifies the market law of the past: emotion-driven market value growth will eventually be counterattacked by the ebb tide of emotions. Therefore, as quickly as Meme coins rise, as violently as they fall. It is worth noting that this decline is likely not a regular technical adjustment, but a signal that the Meme coin has generally receded. There are two main reasons: First, after TRUMP, both Millay’s Libra and the Central African Republic’s CAR have appeared. The phenomenon of “dying in the light” means that the game of pure funds is no longer sustainable. 2. The average daily agreement fee for Meme Coin’s largest launch platform this week was only US$1.47 million, a decrease of 90.4% from the historical peak of US$15.38 million. In 2022, the signal that NFT is in full decline also starts with OpenSea’s revenue plummeting 90%. More importantly, when the NFT’s hype logic was falsified by the market, the NFT has not had a decent rebound since 2022. In other words, investors currently trapped by Meme may never have a chance to break out.
According to Coinmarketcap data, there are currently 11.29 million crypto tokens included in the platform, of which 99.2% have a daily transaction volume of less than US$50 million. According to data disclosed by Coinbase CEO Brian Armstrong, there are currently 1 million new tokens added to the market every week. From historical experience, when market entry barriers continue to decrease and target supply continues to increase, funds usually flow to top projects, and these projects will also receive higher valuation premiums. The current issuance mechanism of the crypto market is more crazy than the registration system of Hong Kong stocks and U.S. stocks, and the market’s trend towards Hong Kong stocks and U.S. stocks will eventually be unstoppable. Therefore, in the long run, only by adhering to fundamentals can long-term asset appreciation be achieved.
In the previous article, we mentioned that this decline has evolved from killing valuation to killing logic, marking the arrival of a deep bear market and the market downturn will last for a long time. However, the most obvious feature of this week’s adjustment is that strong currencies have begun to make up for losses and low currencies have begun to resist losses, which means that a phased bottom has emerged. Of course, grinding the bottom is also a very long stage. Be patient and wait for the new cycle to arrive.
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