Opinion: The meme craze is difficult to sustain. If a bear market comes, altcoins will be severely reshuffled.

Original author: Benson Sun, founder of CoinKarma

[Views on meme season and market outlook]

Although the market is quite bullish now, to be honest, I don’t think the meme season will last too long. At least the market value of the meme sector will not be as high as Murad’s. After the end of the song, the overall altcoin market may usher in a bear market comparable to the collapse after the ICO wave in 2017.

This round of bull market obviously does not have enough narrative to attract external funds. Since the development of smart contracts on Ethereum in 2015, decentralized computing platforms and applications have given enough room for imagination. However, the industry has been developing for nearly 10 years. We have dozens of public chains and Layer 2, as well as countless infrastructure, but the number of DAPPs with more than 100,000 DAU can be counted on one hand, and most of them are speculative and trading applications. In the end, everyone did not choose to seriously think about what problems occurred in the industry, but started buying memes after Murad’s call for Token 2049, just because the chips are more "fair" and because memes have no concept of P/E ratio, so there is no ceiling for valuation. Anyway, everyone is not acting anymore. I’m here to make money. Who cares about decentralization, Web3, or mass adoption?

Meme has its value from the perspective of cultural communication and identity recognition, but when all industry participants are talking about meme, when first-tier big firms list low-market-cap, high-risk meme tokens for traffic, it means that there are some problems in the industry from a fundamental perspective. It hasn’t collapsed yet, so everyone can turn a blind eye and pretend nothing has happened. In fact, every participant is thinking about when he or she can quietly appear at the bustling party. In the last round, Musk called for Doge, but in this round, the meme token is a fight between the currency circle itself. Since the collapse of Silicon Valley Bank and FTX, supervision has become more stringent, and it has become more difficult to deposit Crypto in the OTC market. The gap between the new funds of BTC ETF and the attributes of meme is too large, and the spillover effect of funds is limited. If there is no new blood to take over, the sustainability of this wave of meme market will be shorter than everyone imagined.

This time I went to Dubai to chat with several industry insiders. In fact, everyone has noticed something wrong, but from the standpoint of exchanges/media/project parties/VCs, this "wrongness" is really hard to say. After several highly valued king-level projects fell from the altar since they were listed, speculative funds needed an outlet to vent. Murad's speech opened Pandora's box and led the currency circle from idealism to nihilism. The super high returns of the primary market in the 2021 bull market forcibly rationalized the high valuation of the project. In fact, from the perspective of outside the industry, why is it that a prototype-only project cannot be sold at all? How can a project that has not yet started to make money have a valuation of tens of millions of dollars in the primary market? Earlier this year, the market value of $WLD even surpassed Open AI. What is this?

This phenomenon continued until the bull market in 2024, and it finally couldn't continue. When there are not enough new leeks, the valuation illusion can't last after all.

Now you can post memes about any ghost topic. The community digs up the names of celebrities' dogs and cats. A concept can post memes on 3-4 chains at the same time. There are also various capitalization disputes. Countless new plates die every day. Is this different from the ICO in 2017, when all concepts had to be rubbed with blockchain coin issuance? ICO will at least pretend to post white papers, find partners, and get a great team profile. Now dev can issue coins with one click, create a Twitter account and Telegram group to go to CX. At this rate, retail investors' capital will only be lost faster. A bunch of meme liquidity pools with a market value of hundreds of millions are only a few million. I really don't know what the collapse will look like.

Where are we now? To be honest, I don’t know, but what I do know is that when the bear market comes, there is a high probability that the valuation of altcoins will usher in a reshuffle that will be even more severe than the bear market in 2022, and this is especially true for meme coins. In the late stage of the bull market, those with the most vision will die the most miserably. As a secondary trader, there is a short-term profit effect and you don’t need to think too much, just go for it. But I have been thinking about how to exit this liquidity game early. Here are some of my ideas: 1. Use the market capitalization of meme coins to estimate the current market madness (see the 10/10 tweet) 2. Use moonshot’s app rank to estimate the level of off-market funds entering the market (the app is very new and there is not much information yet, but at least it can be used as a reference) 3. Closely observe the proportion of the overall meme sector contract holdings and spot trading volume to the circulating market value. The former represents the leverage ratio, and the latter represents the turnover rate 4. Closely observe when the Bitfinex ETH/BTC whale positions are closed, and each time the ETH/BTC positions are closed, the turnover rate will be 0. If everything collapses, the altcoins may also fall with it.

Finally, I subjectively believe that in the next bear market, with the complete collapse of the meme and the reshuffle of the altcoin valuation, BTC Dominance % is likely to reach a height never seen in the past five years, but shorting the meme and going long on the pie is too dangerous if it encounters a tail rise, so I will choose to invest in long BTC dominance% contracts with no more than 3x leverage when the market sentiment is the most fomo.

Having talked about the meme part, I think I will be more optimistic about BTC, but I should not be too optimistic. If BTC is an AMM pool, the emergence of spot ETFs is equivalent to increasing the liquidity of this pool a lot, and the resistance to pulling up and smashing down will increase. In addition, option ETFs will also be listed later, and the overall unilateral market momentum will definitely decline (those who choose to sell are big brothers with goods, so I won’t expand on this aspect). If Trump is elected next, there will be a direct explosion, and it will not be like the rise at the beginning of the year. In the absence of special catalysts, I think it will be very difficult to break 100,000. But similarly, if there is a bear market next, BTC should not be as miserable as the violent interest rate hike in 2022. There is currently no fund disk like LUNA with tens of billions of dollars that may collapse at any time, and the decline may be milder than in the past bear market (provided that there is no external black swan)

Although I am very pessimistic, I believe in the resilience of the Crypto industry, and that real innovation will come in the next cycle. I will always be hopeful and full of tears.

Original link