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Risks and Opportunities in the FOMO Market: Approach Current crypto market Fluctuation with Caution
Trading Precautions Under FOMO Market Conditions
Recently, the cryptocurrency market has experienced a rapid rise, triggering panic buying sentiment among investors. This quick surge started with large-cap altcoins such as Chainlink and Solana, and then spread to low-cap tokens and meme coins. Within just a week, the market has been filled with significant fluctuations of emerging tokens like ORDI, MEME, and TIA.
This rapid rise seems to contain a sense of urgency, as if missing the current opportunity would mean no longer being able to profit. However, this sentiment may stem from pure panic. It is worth noting that some well-established coins like MBL and FIL have also seen significant increases. This situation is quite similar to the market conditions before the outbreak of the COVID-19 pandemic from late 2019 to early 2020. Looking back at that history, we might call it a bull market trap. So, is the current market facing similar risks? Or is this merely an investor's stress response to the bear market?
In this round of bullish momentum, Ethereum's performance has been disappointing. Compared to other major tokens, ETH's growth has been significantly lagging. Taking the data from October 1 to November 14, 2023, for example, BTC rose by 30%, SOL soared by 120%, ATOM grew by 22%, AVAX increased by 69%, FTM went up by 50%, NEAR climbed by 43%, while ETH only rose by 18%. This underperformance may be related to ETH's staking mechanism. Since the Shanghai upgrade, more ETH has been locked in staking, which has somewhat limited its price volatility.
It is worth noting that some venture capital firms may take advantage of this surge to sell their held tokens. Taking Solana as an example, a significant portion of its token distribution belongs to internal investors. In addition, the SOL tokens held by FTX/Alameda will gradually be unlocked before 2028, which may put pressure on the future market.
In this market environment, investors need to be vigilant about the actions of various parties taking the opportunity to sell off assets. This includes project development teams, early investors, and even distressed exchanges. Although selling off at the beginning of a bull market often proves to be a wrong decision, for certain projects in urgent need of funds, this may be a choice they have to make.
The inflow of stablecoins is also worth paying attention to. Recently, there has indeed been about $3 billion in stablecoin inflows into the market, but compared to last year's massive capital outflows, this figure still seems insignificant. These inflows may mainly come from existing cryptocurrency enthusiasts rather than new market funds.
The news about Bitcoin ETFs is also a focal point that investors need to closely monitor. The ETF is expected to be approved in early 2024, but there may be delays. Traditional asset management companies recommend that clients keep their cryptocurrency investments at 1-5% of their overall portfolio, which means there won't be a large influx of funds.
Overall, there is still uncertainty in the current market. This rise is similar to the situation in the first half of 2023, with significant fluctuations in investor sentiment. Market liquidity remains insufficient, and some investors still prefer short-term profits. The comparison between spot trading volume and futures trading volume also indicates that the market is still dominated by short-term speculation.
An ideal bull market typically shows gradual increases rather than sharp fluctuations. Investors should remain cautious and focus on long-term trends rather than being swayed by short-term volatility.