Author: Aylo
Compiled by: TechFlow
First, this cycle has indeed been very difficult, don't let anyone pretend to tell you it's not difficult.
But the reality is, each cycle is more difficult than the last. You are competing with a larger pool of participants, more and more participants are becoming more sophisticated, and ultimately there are more losers.
If you don't have the majority of your holdings in BTC or SOL during the bear market, you may not have made money, and may even be tearing your hair out.
If I hadn't used SOL as the unit of account, I would have struggled myself. Yes, we do have some big individual winners, but I guess if you speculate heavily on those assets, you may end up giving back some or even a large portion of your gains. Especially because people don't just retire after a big win.
They'll say "there's still time in the cycle" and then think they can keep going up, and that's how they give their gains back. "Play stupid games, win stupid prizes" is a truth that never goes away. Sometimes, this is just played out over a longer time frame for traders and gamblers.
So why is this cycle so difficult?
PTSD
We have two examples of how most Altcoins have dropped 90-95% in major Altcoin cycles. Add to that the Luna and FTX collapses, which have caused a chain reaction across the industry, with asset prices potentially falling lower than they should have.
Many big players have been wiped out, and we haven't seen the return of crypto lending platforms in this cycle yet. This PTSD deeply affects the crypto natives. Especially the way the Altcoin market trades, mainly because "everything is a scam" has become the mainstream view of this cycle.
In the first two cycles, the belief that "this technology is the future" was more prevalent, but now it has become a minority view, or on par with "everything is a scam". No one wants to hold anything long-term because they don't want to lose the majority of their portfolio again.
This creates a "max jeet cycle". This sentiment is also amplified on Crypto Twitter, as participants constantly seek the top of the cycle.
This psychological impact is not limited to trading behavior - it also affects the ecosystem's attitude towards building and investing. Projects now face higher scrutiny and the trust threshold has doubled. This has both positive and negative sides: while it helps filter out obvious scams, it also makes it harder for legitimate projects to get attention.
Innovation
While innovation continues and infrastructure is constantly improving, there are no longer any 0 to 1 breakthroughs like DeFi that are jaw-dropping.
This makes arguments like "crypto has made no progress" more palatable, and leads to more "crypto has achieved nothing" narratives.
The landscape of innovation has shifted from revolutionary breakthroughs to incremental improvements. While this is the natural evolution of any technological development, it poses challenges for a narrative-driven market.
We also still lack breakthrough applications that are necessary to bring crypto to hundreds of millions of on-chain users.
Regulation
The corrupt US Securities and Exchange Commission (SEC) has caused chaos. They have hindered the industry's progress and prevented certain areas (like DeFi) from further developing product-market fit (PMF) that could have gained wider adoption.
They also prevent all governance tokens from conveying any value to holders, thus creating a "all these tokens are useless" narrative, which is true to some extent. The SEC has driven away developers (see Andre Cronje's description of the SEC forcing him to exit), prevented traditional finance (TradFi) from interacting with the industry, and ultimately forced the industry to raise funds from venture capitalists. This has led to poor supply and price discovery dynamics, with value being captured by the few.
However, we are now seeing some positive changes, such as Echo, Legion, and more public sales.
Financial Nihilism
All of the above factors have led financial nihilism to be a major factor in this cycle.
The "useless governance tokens" and the high FDV (fully diluted valuation) and low liquidity dynamics caused by the SEC have pushed many crypto natives towards memecoins in search of "fairer" opportunities. And indeed, in today's society, with asset prices soaring and wages not keeping up with the endless devaluation of fiat, young people have to gamble to improve their status, so memecoins lotteries are very appealing. Lotteries are appealing because they provide hope.
Since gambling has product-market fit (PMF) in crypto, and we've gotten better technology for gambling (like Solana and Pump.fun), the number of tokens being issued has exploded. This is because many people want extremely high-risk gambling, and where there is demand, there is supply.
The "trenches" have always been a part of crypto, but in this cycle, it has become a well-known term. This nihilistic attitude manifests in various ways:
The rise and mainstreaming of "Degen" culture
Shorter investment time horizons
More focus on short-term trading rather than long-term investing
Normalization of extreme leverage and risk-taking
Indifference towards fundamental analysis
Past Cycle Experiences Become Obstacles
The past few cycles have taught people that they can buy some Altcoins during bear markets and eventually get rewarded by outperforming BTC.
Almost no one is a good trader, so this has been the best path for most people. Overall, even the worst Altcoins had a chance.
But this cycle is a trader's market, more suited to sellers than holders. Traders have even made the biggest gains in this cycle through HYPE airdrops. The narratives in this cycle don't last long, and there are fewer compelling narratives. There are more sophisticated participants in the market who are better at extracting value efficiently, so the mini Altcoin bubbles haven't been particularly large.
The first hype cycle of AI agents is an example. This may be the first time people felt "this is what we've been looking for". But this is still early, and the long-term winners may not have emerged yet.
Bitcoin Has New Buyers, Altcoins Mostly Don't
The divergence between Bitcoin and other assets has never been more pronounced. Bitcoin has unlocked demand from traditional finance. It now has an incredibly new source of passive demand, with even central banks discussing adding it to their balance sheets.
Altcoins, on the other hand, have a harder time competing with Bitcoin, which makes sense, as Bitcoin has a very clear target - the market cap of gold.
Altcoins really don't have new buyers. Some retail came back when Bitcoin hit new highs (but they bought XRP 💀), but overall, there is not enough new retail money flowing in, and crypto still has a poor reputation.
The Changing Role of Ethereum
The decline in Bitcoin's dominance is largely due to the growth in Ethereum's market cap. Many have viewed Ethereum's rise as the trigger for "Altcoin seasons", but in this cycle, this rule of thumb has not worked, as Ethereum has underperformed due to fundamental reasons.
Many traders and investors have struggled to accept that Ethereum has failed to drive higher risk appetite, and in fact, it has continued to play the role of ending mini Altcoin seasons, contrary to the past.
Although there is evidence that certain narratives and sectors can operate on Ethereum without any action, many traders still believe that Ethereum needs to rise in order to usher in a true Altcoin season.
What should I do?
So, what should you do from here?
Work hard, or work smarter. I still believe that fundamentals will eventually prevail in the long run, but you must truly understand the projects you are supporting and how they can actually outperform BTC. Currently, only a few candidates meet this criteria.
Look for projects with the following characteristics:
Clear revenue model
Actual product-market fit
Sustainable token economics
Strong narratives that can complement the fundamentals (I believe AI and RWA fit this)
I believe that due to the unlocking of US regulation, those projects with stronger fundamentals and product-market fit (PMF) are finally able to see their tokens accrue value, and these projects have also become lower-risk choices. Protocols that can generate revenue are now poised to perform well. This is a significant shift from the "greater fool theory" that has dominated many token models in the past.
If your strategy is to "wait for retail to come in and then sell", I think you will run into a lot of trouble. The market has moved beyond cycles simply driven by retail, and savvy participants are likely to front-run this obvious strategy.
You can choose to become a better trader, try to cultivate your own edge, and focus on doing more short-term trades, as this market does provide many consistent short-term opportunities. On-chain trading may yield higher multiplier returns, but it will also be more ruthless during downturns.
For most people without a clear edge, the "barbell portfolio" is still the best choice. Allocate 70-80% of your funds to BTC and SOL, and then set aside a smaller portion for more speculative investments. Rebalance periodically to maintain these ratios.
You need to understand how much time you can devote to the crypto space and adjust your strategy accordingly.
If you are a normal person with a regular job, competing with those young people who sit there 16 hours a day is not going to work. The strategy of passively holding underperforming Altcoins and waiting for your turn is also no longer effective in this cycle.
Another strategy is to try to combine different domains. Build a portfolio based on solid assets, then look for opportunities like airdrop mining (now more difficult, but still low-risk opportunities), or identify some emerging ecosystems and get in early (e.g., HyperLiquid, Movement, Berachain, etc.), or focus on a specific sector.
I still believe the Altcoin market will grow this year. The conditions are in place, and we are still correlated with global liquidity, but only a few sectors and a smaller number of Altcoins will be able to significantly outperform BTC and SOL. Faster Altcoin rotation will continue to occur.
If we encounter some crazy money printing, we may see something closer to the traditional Altcoin season, but I think the likelihood of this is lower than we hope. Even in such a case, most Altcoins will only provide market average returns. We still have many important Altcoins launching this year, and liquidity will continue to be diluted and diversified.
It's not easy, but I'll give you some hope: I've never seen someone who has seriously invested in the crypto space for years without making significant money.
This asset class still has many opportunities, and there are many reasons to be optimistic about its growth.
Ultimately, I don't know more than others, I'm just adapting to the conditions I see in this cycle.
Additionally, I want to add that we are not at the beginning of the cycle. This is clear. The bull market has been going on for a long time, and this fact will not change whether you make money or not.
"Control the downside risk, and the upside returns will take care of themselves."
This famous saying will always be true.
