Author: Metrics Ventures
In the deep winter of 2018, I was inspecting a photovoltaic power station in the Qaidam Basin of Qinghai. In the minus 20-degree Celsius wind, the chief engineer pointed to the vast array of idle photovoltaic panels and said, "These are the legacy of the last round of expansion. Once the market has cleared, new technologies will emerge." At this moment, gazing at the Altcoin rankings on Binance, the sideways K-lines of those projects are strikingly similar to the photovoltaic panel arrays of that year.
The cryptocurrency market is experiencing the same cyclical patterns as traditional industries. Just as the 2012-2016 photovoltaic industry shakeout, the CEX Altcoin market has entered a brutal clearing stage: the daily trading volume of many 2021 star projects has fallen below $10 million, and the median FDV has evaporated by over 70% from its peak. This mirrors the trajectory of blue-chip stocks in photovoltaic, internet, and coal industries plummeting from triple-digit prices to penny stocks.
But behind the cruelty of the cycle lies a bountiful gift. Just as Longi Solar bet on monocrystalline silicon technology at the industry's nadir, the darkest moment of the Altcoin market is now giving birth to the forces that will break the deadlock:
1. Reconstruction of Valuation Logic: VC's "Paper Wealth" and Leveraged Carnage
At the peak of the 2021 bull market, venture capitalists (VCs) were like speculative hoarders of coal:
Valuation Bubble: The median pre-money valuation of VC-backed seed projects reached $82 million (Messari 2022 report), a 16.4-fold expansion from the 2017 cycle (compared to only $5 million for similar projects in 2017), causing tokens to be already overvalued by 10x when listed on CEXes;
Leveraged Blowups: Institutions like Genesis provided 100% LTV BTC-collateralized loans, fueling an arbitrage loop: institutions collateralize BTC → obtain stablecoins → allocate to high-beta Altcoins. Whales could leverage BTC to buy Altcoins, creating a false prosperity. But with the 2022 Genesis blowup, the value of collateral plummeted, triggering a cascade of liquidations, severing this "artery of capital infusion", and turning the Altcoin market into a slaughterhouse for primary market dumpsters.
2. Ongoing Clearing: Crypto Industry Cycles Always Outpace Traditional Industries
After two years of shakeout, we can observe the following market signals:
Market Sentiment at the Bottom: The average market cap of CEX Altcoins has already approached 2020 levels, with the market caps of many 2022-2024 projects shrinking by over 80%; the retail exit rate has reached a historical peak, with the 90-day active address ratio of retail holders dropping to 12.3% (Santiment), approaching the historical nadir; the CEX Altcoin Fear and Greed Index has remained below 20 for 15 consecutive weeks, reaching the 2020 March bottom;
Gestation of New Battlegrounds: While traditional market makers are contracting, new mechanisms like base-quote pairs, on-chain DEX liquidity pools are rebuilding the leverage flywheel, and AI+Crypto, Compliance+Crypto are attempting to incubate new industry dynamics.
Conclusion: The current Altcoin market is reminiscent of the coal stocks around 2015 - rapid capacity clearance, plummeting market enthusiasm, where neither bullish nor bearish news can trigger industry fluctuations, facing the threat of cannibalization by the replacement sector (DEXes) in the eyes of the entire market. But there is nothing new under the sun, and the first principle of investment is always liquidity and cheapness. Hidden in the ruins are gold mines that have been wrongly killed, and we believe that quality projects will only emerge after the industry has settled.
The Dark Battle of Altcoin Capital: CEX Valuations Enter a Volatile Bottom-Seeking Phase, Glimmers of Hope in the New Frontier of DEXes
1. CEX Predicament: VC Poison Pill Unresolved, Clearing Enters the Second Half
The Altcoins on centralized exchanges (CEXes) are essentially the "bagholders" of the primary market valuation bubble:
Pricing Power Tug-of-War: A project that VCs invested at a $1 billion valuation is now only recognized by the secondary market at a $100 million market cap, leaving a $900 million "valuation gap" (e.g., a project with a $20 million seed round valuation is now only worth $4 million in circulating market cap after listing on Binance);
Capital Backlog: The $17 billion inflow from BTC ETFs, but due to tightened risk controls, market makers can no longer leverage BTC like in the past, leaving the capital stranded in the new trading venues, turning CEX Altcoins into a "dried-up riverbed" entering a negative feedback loop of loss-making effects.
2. DEX Breakthrough: Revolution in Secondary Pricing
Decentralized exchanges (DEXes) are rewriting the rules of the game:
Traditional Path: VC Pricing → CEX Listing → Retail Bagholding
Inverted Valuation: On DEXes, retail can buy the full circulating token at 1/10 the price of VCs
Valuation Reconstruction Mechanism: DEX markets discover prices through AMM algorithms, with typical projects listing at a 73.5% lower premium than CEXes (Dune Analytics); DEX's cannibalization of CEX liquidity is catalyzing a new paradigm of asset pricing: Community Consensus → DEX Liquidity Proof → Passive CEX Listing
Consensus Fission: When a niche concept (e.g., AI Agent) becomes a mainstream consensus through community propagation, the flow of tokens evolves from "whales vs. retail" (PvP) to "incremental inflow" (PvE). Typical cases:
Virtual: From a DEX niche to being added to Grayscale's watchlist, its market cap surged 20x in three months;
AI16Z: A community project mimicking a16z's investment logic, attracting capital from the traditional tech circle.
Core Logic: CEXes are "state-owned enterprises shedding their burdens", while DEXes are "private enterprises backdoor listing" - the former awaits policy rescue, the latter relies on grassroots movements.
CEX vs. DEX: Two Sets of Survival Rules, Two Codes of Wealth
1. CEX Strategy
Picking Cigarette Butts: Only buy projects with a market cap of $5-20 million, with real products and communities, and where the project team retains core pricing power, avoiding "penny stocks" (daily volume < $1 million);
Waiting for Industry Cycles: Referring to the history of coal stocks, plan to enter the market in 2025-2026, wait for the liquidity easing cycle to realize the return of market capitalization, and capture the core targets of industry trends (e.g., buying MKR at $200 in 2020, selling at $6,000 in 2021);
Liquidity Arbitrage: In continuous market trends, the liquidity support of fully circulating tokens on different CEXes often exhibits a linear change, and at sentiment bottoms, there are often mispricing opportunities within the market cap range, which can be used for liquidity and sentiment arbitrage. At this moment, we believe ETH has a significant mispricing opportunity to exploit, given its access to the USD liquidity system shared with Bitcoin.
2. DEX Strategy
Early Sniping:
$5-20 million market cap: Focus on team background, Github code/product quality, token distribution signals;
$20-50 million market cap: CEX listing expectations (e.g., a DeFi project being added to Binance's watchlist, the DEX price surged 300% in advance);
Community Empowerment: Observe the consensus building of MEME coins, taking the AI Agent track as an example, where a 1-unit increase in the token's Social Index (mention frequency on social platforms/market cap) corresponds to a 47.8% excess return (LunarCrush data), capturing the critical turning point of PvP to PvE;
Conclusion
In the dusk of the Qinghai photovoltaic base, the new generation of bifacial modules are charging up in the sunset glow. The Altcoin market is a giant gold mine, but most people come in with dreams of striking it rich and leave with mere pebbles. The sun has seen it all before, and the first principles of investment - liquidity and cheapness - will always hold true. Buried in the ruins are the gold mines that have been wrongly killed, and we believe that quality projects will only emerge after the industry has settled.
Here is the English translation:The cyclical gears of the crypto market have never stopped turning, and those projects that have honed their weapons in the cold winter will ultimately shine the brightest when the dawn of liquidity breaks. What we need to do is simply to calibrate the compass like seasoned miners - when others abandon the pit, and to stock up on ammunition before the industry awakens. Only by combining the patience of a coal miner, the ruthlessness of a gambler, and the computing power of an accountant can we dig out the real gold from the ruins. Remember: the bull market is the stage for realizing profits, and the bear market is the battlefield for collecting chips - and now is the golden moment to shoulder the basket and pick up the ore, with a firm bullish view on the ETHBTC exchange rate for trading opportunities and the golden opportunity to build positions in Altcoins in the coming year.
