Global Markets Release Risks Gradually, Altcoins Still Need Time to Stabilize

Metrics Ventures Market Insights in September:

1/ Bitcoin has been fluctuating between $50,000 and $60,000, and market sentiment remains weak. Daily trading volume has hit record lows, and funding rates continue to stay negative. Ethereum has also fallen to new lows, signaling that the market has entered a deep freeze. Although altcoins rebounded slightly after the FOMC meeting eased some of the bearish sentiment, the recovery was driven mainly by a lack of liquidity, with overall trading volume still lacking momentum.

2/ Altcoins are generally in a consolidation phase after a pullback from their March/April highs. However, we have not yet seen signs of readiness across the altcoin market. Interestingly, many tokens have fallen back to their lows without significant distribution, suggesting that market makers still have an incentive to maintain prices or drive a brief rebound during this period of extreme bearish sentiment. This could be a positive indicator.

3/ From our perspective, the global markets have begun to release some risk for the first time since August. Although a few altcoins have shown decent recovery, we believe the crypto market still needs time to regain strength. The market will likely remain in a state of disorderly consolidation. Looking ahead, we think the current period of adjustment is building a solid foundation for next year's rally, so there is no need to worry about the volatility we are seeing now.

Market Overview:

This month, the market has been relatively quiet, with less hype and shorter-lived hot trends compared to early 2023. There's been renewed debate over the challenges Ethereum and other blockchain-native innovations are facing in terms of adoption. In some ways, the current market sentiment is even gloomier than it was in 2019. After the FOMC meeting, sentiment eased a bit, and some altcoins saw decent recoveries, but overall, market activity remains scattered, with low trading volumes.

Looking back at the price movements, Bitcoin has been in a wide, disorderly trading range since April. This can be attributed to declining trading volumes, reduced market attention, and shrinking risk appetite. What's noteworthy is that we're seeing this disorderly wide range near new highs, which aligns with our long-held view that we may be in the midst of a unique macro asset cycle.

From an altcoin perspective, current market opportunities are mostly centered around speculative positioning. This highlights the lack of strong narratives and the weak internal driving forces within the industry. Aside from AI and meme coins, there's been no clear capital flow or dominant market narrative. As we've noted before, more market participants are starting to recognize the shift in pricing models and market dynamics.

However, the reflexive nature of the market remains unchanged. If this trend continues, we could see a return to purely narrative-driven, speculative trading, reinforcing the "casino" nature of the market. From a secondary market operations standpoint, choosing the exit timing and the right strategy will become increasingly critical.

Overall, our focus will remain on patience. The wide trading range will eventually come to an end, and the risk-reward ratio for "buying low and selling high" will sharply decrease. Staying vigilant and being ready to identify the market's turning point after hitting bottom will be the smarter strategy going forward.

Key Trends Shaping the Industry:

The venture capital (VC) landscape in the primary market is going through a drastic reshuffling, with small and mid-sized VCs rapidly exiting as many projects struggle with a DPI below 1. In contrast, top-tier VCs continue to grow rapidly, raising new rounds of funding in just five months. The primary market is heading towards extreme polarization. Besides leading VCs, only incubators focused on early-stage projects with unique perspectives or vertical VCs specializing in niche ecosystems will have the competitive edge and high-risk rewards to survive in the market.

The hottest application sectors being discussed are SocialFi and AI Crypto. AI adoption faces hard barriers that hinge on key technological breakthroughs. Pumpfun has emerged as the most successful SocialFi project, but the SocialFi model best suited for Web3 is not a decentralized version of Twitter, but rather a social casino.

Currently, the only validated business models in the industry are Bitcoin, stablecoins/payments, and online gambling. Stablecoins have become the new 'hyper-competitive' sector in the primary market, but no one can clearly explain how to break Tether's network effect. The industry's trajectory is becoming clearer: aside from BTC, Web3's endgame business model will be casinos.

Quantitative trading returns are under increasing pressure, with many quantitative teams transitioning from traditional stock markets to the crypto market. However, given the current size of the quant market relative to available liquidity, further profit compression is expected. There's also growing concern over high-leverage quant strategies, which are becoming more vulnerable to liquidation risks during extreme market conditions.