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

The current crypto market is exhibiting some unique characteristics, showing significant changes compared to previous bull markets. Looking back, whether in the A-shares or the crypto market, bull markets usually follow certain patterns: first, high-certainty assets are speculated, then hot sectors, and finally speculative assets. However, the current market situation is different.

Main Characteristics of This Market Cycle

1. Insufficient liquidity of funds, weak profit effect
2. The sector rotation is not obvious, lacking a comprehensive upward trend.
3. Core assets ( BTC, ETH ) dominate, while other assets perform mediocre.
4. MEME coins may experience a short-term surge, but it is difficult to sustain.

The main reason for this situation is that the flow of funds and the transmission mechanism have changed. The funds brought by ETFs mainly flow to BTC and ETH, and cannot be effectively transmitted to other sectors. The crypto market can be likened to a layered reservoir, where only when the upper layer is overflowing will the funds flow to the next layer.

The sluggishness of the secondary market affects the primary market

Taking the recent zk projects as an example, many participants' years of effort have backfired. This reflects that the primary market (, like grabbing airdrops ), is difficult to accommodate too many participants. In the context of insufficient liquidity in the secondary market, opportunities in the primary market are also reduced accordingly. For ordinary investors, the primary market has become extremely challenging.

In addition, the listing of newly valued coins further compressed the market liquidity. Projects such as BB, Not, io, and zk had their high valuations limit the upward potential from the beginning. The influx of funds into new coins indirectly squeezed the liquidity of other currencies.

High FDV ( Fully Diluted Valuation ) Issues

According to a research report, the current MC/FDV ratio is at its lowest level in nearly three years. This means that to maintain the current price, the market needs huge liquidity support. A high FDV may be beneficial for project parties and VCs, but it is not conducive to attracting retail investors.

This has led to a situation of "no one taking over".

• Retail investors are unwilling to take over VC coins with high FDV.
• Institutions are unwilling to take over the volatile MEME coins.

Conclusion

The core issues currently facing the crypto market are insufficient funds and high valuations with low liquidity. This affects the performance of the secondary market, which in turn impacts the primary market. Coupled with the special circumstances of the primary market, this further weakens the overall profit-making effect.

Addressing these issues may be key to unlocking the next true bull market. While we cannot accurately predict the market direction, recognizing and addressing these problems may lay the foundation for a healthier market development in the future.