Outlook for the Crypto Assets Market

The weekend gave me more time to think, allowing me the opportunity to delve into the current Crypto Assets market situation.

I believe that the overall trend of the Cryptocurrency market will not become clear until after September. Considering macroeconomic pressures, insufficient summer liquidity, and end-of-quarter position adjustments, the real market trend will only be evident after the end of the August holiday and the reactivation of market participants. Recent market activities show that the rise in most small coins is mainly due to short squeezing. Traders, influenced by the reflex from previous rebounds, chase short-term momentum but lack support from long-term holders. Most investors have already been severely affected by the previous market turmoil. As expected, most rapidly rising altcoins subsequently experienced similarly sharp declines.

Ethereum has experienced an unexpected rebound, led by the previously most severely hit AI and memecoin sectors. In contrast, coins with practical utility, solid fundamentals, or buyback mechanisms have shown greater resilience, performing more steadily during the decline and recovering faster. From this, we can draw the following insights:

1. Bitcoin demand remains solid and enduring

Traditional capital is gradually entering the market through regulatory channels such as ETFs.

The capital nature of Bitcoin currently supported is significantly different from the past. This is also why large-scale Bitcoin liquidation is unlikely to occur unless influenced by significant macro events.

2. Internal Differentiation Intensifies Small coin

Ultimately, funds will flow back to small coin species, but not comprehensively. Only those proxy coins with clear purposes and practical applications are likely to attract these funds. That's why I believe Ethereum will outperform other public chains. Regulatory clarity, growing DeFi usage, deflationary mechanisms, and staking demand together form a strong positive feedback loop. Moreover, due to Ethereum's long-term failure to meet expectations, there are still a large number of potential buyers watching from the sidelines.

3. VC-backed coins face structural risks

The unlocking of coins will continue to put pressure on prices. In the case of insufficient liquidity, continued selling pressure from validators and early investors limits the upside space. This is why I believe that the overvalued coins listed on centralized exchanges have poor future prospects. Coins from certain ecosystems, in particular, face continued selling pressure due to their validator reward mechanisms.

4. Memecoin has structural advantages

Memecoin has structural advantages, no pressure from venture capital unlocking, fair distribution, entirely based on attention. This is a pure speculative mechanism that has played a role in the early cycle.

But I think this stage is coming to an end.

The launch of certain coin generation events and the introduction of popular political figure coins marked the peak of memecoin attention. Subsequently, interest in memecoins began to wane. Even during the rebound in April, the performance of some public chains was not as good as Ethereum - if everyone already holds these representative coins, who will become the marginal buyer when the hype around memecoins fades?

Some memecoins may still perform well, especially those coins that have become popular outside of encryptionTwitter, such as on TikTok or Instagram, driven by influential figures. These may still bring about asymmetric wealth effects. But the era of 'cute animal coins' as alpha has ended. Only coins with strong stories and deep market recognition have real speculative value.

Ironically, fatigue and suspicion of VC support for representative coins have opened the door to fair launch Web2/3 projects, which will be the next wave of wealth creation opportunities.

Some projects are good examples. But to seize these opportunities, you need to be active on the chain. When information is asymmetric, big opportunities always arise. Once everyone knows something, it no longer has returns.

This is why I pay more attention to the on-chain market. The success of certain projects has sparked the desire to find the "next hot project," and capital is beginning to chase similar narratives of fair distribution of small coins. Just as some traders have made huge profits by trading memecoins - attention guides the flow of capital.

5. Future Market Trends

So, if memecoin is no longer the opportunity... what's next?

My view: The integration of AI and Crypto Assets.

If you have been following my updates, you will know that most of my activities in this cycle - after the early support of some public chains and venture capital-backed coins - have been focused on memecoins and AI.

Just like the DeFi summer, most early AI projects have failed after speculation. But practical projects are quietly being built in this bear market. We have seen some of these projects appear on the chain.

As memecoin profits dry up, attention will naturally shift to new narratives. AI, with its clear utility, is very suitable to become the next focus.

Many AI x Crypto projects are fairly distributed, echoing the narratives of some successful projects.

This is why I have been spending time researching and positioning myself in this area during the calm weeks. There is no need to rush to build the entire position now, but I believe that if the market experiences a strong rally again, this area will present the greatest asymmetric opportunity.