Analysis of the Current State of the Crypto Assets Market: Insufficient Liquidity and Overvaluation Dilemma

Looking back at the patterns of past bull markets, both the A-shares and the Crypto Assets market have followed a speculation logic from core assets to thematic stocks. However, the current Crypto Assets market presents characteristics different from before, mainly manifested in insufficient Liquidity and a weakening profit effect.

Characteristics of This Market Round

1. Uneven liquidity distribution: The approval of the Bitcoin ETF has injected strong liquidity into BTC, but this liquidity has not effectively spread to other tracks and sectors.

2. Funding transmission is obstructed: Structural changes in the market have made it difficult for funds to be transmitted layer by layer as usual. The market can be likened to a layered reservoir, where only when the upper layer overflows can the funds flow to the lower layers.

3. The weakness of the secondary market affects the primary market: insufficient liquidity in the secondary market leads to a decrease in opportunities in the primary market (such as airdrop farming). Ordinary investors find it increasingly difficult to survive in the primary market.

4. Overvalued projects squeeze liquidity: Recently listed several overvalued projects further squeezed market liquidity, such as BB, Not, io, and zk.

High FDV (Fully Diluted Valuation) Phenomenon

According to the data, the FDV of issued tokens in the first five months of 2024 is approaching the total for the entire year of 2023. Issues arising from high FDV include:

• Retail investors are unwilling to buy high FDV tokens and are instead focusing on fully circulating Meme tokens.
• Institutions are unwilling to take over the highly volatile Meme coins.
• The market finds it difficult to reach a unified consensus, with each party "playing their own game".

Conclusion

The core issues facing the current Crypto Assets market are insufficient funding and high valuations with low Liquidity. This has resulted in:

1. The effect of the secondary market on the primary market has weakened.
2. Competition in the primary market intensifies, making it difficult for ordinary investors to profit.
3. The overall market profit-making effect is declining.

To achieve a true bull market, the market needs to gradually address these issues. Investors should adjust their strategies to adapt to the new market environment, rather than simply applying past investment logic.