Crypto Market Current Situation Analysis: Insufficient Liquidity and the Dilemma of High Valuation

A Review of Market Speculation Logic

Looking back at previous bull markets, whether in the A-shares or the crypto market, they all exhibit a similar speculation pattern. Starting from core assets, it gradually spreads to high market capitalization, medium market capitalization, and low market capitalization assets, and finally to concept speculation and speculative assets. This pattern reflects the process of changes in market capital flow and risk preferences.

Characteristics and Issues of the Current Bull Market

The current round of the crypto market shows some unique characteristics:

1. Insufficient Liquidity: Although the approval of ETFs has brought strong liquidity to Bitcoin, this liquidity has not effectively spread to other sectors.

2. The profit-making effect has weakened: apart from core assets, other sectors generally performed poorly, and even saw declines.

3. Changes in capital flow structure: ETF funds are primarily flowing into Bitcoin and Ethereum, and cannot be transmitted layer by layer as before.

4. The secondary market affects the primary market: Insufficient liquidity in the secondary market leads to impacts on airdrops and financing in the primary market.

5. Overvaluation and Low Liquidity Issue: New projects are generally overvalued, but the liquidity is low, which suppresses market participation.

The Impact of High FDV ( Fully Diluted Valuation )

The impact of high FDV varies among different market participants:

• Project parties and venture capital may benefit from it.
• Little impact on the exchange
• Retail investors are unwilling to take over due to concerns about a large amount of unlocking in the future.

This has led to a bizarre cycle in the market of "mutual avoidance": retail investors steer clear of high FDV projects, while institutions keep their distance from highly volatile concept coins.

Conclusion

The core issues facing the current crypto market are insufficient funding and an imbalanced valuation structure. These problems have led to poor performance in the secondary market, which in turn affects the activity level of the primary market. Market participants need to adjust their investment strategies to adapt to the new market environment. Only when these fundamental issues are resolved can the crypto market potentially usher in a new round of comprehensive prosperity.