Dehydrated Poster: Is SOL a better choice than ETH?

Highlights of this issue :

1. Ignore the FUD about ETH

2. Why do coins with high valuations and low circulation fall?

1. Laughing (@Laughingx7): Is SOL a better choice than ETH for large funds now?

Theoretically, the peak of this round of Sol has a chance to reach 50% of the market value of ETH. Previously, the peak of ETH was 50% of BTC. In other words, if ETH and other tokens are defined as copycats, then ETH is the first and Sol is the second. Now the momentum of the second is very strong. In the past experience, in a cycle, the peak market value of the second is 30%-50% of the first.

The reason why Sol is so strong this time is that it has experienced real death and has sufficient turnover at the bottom. Sol is the first large-cap currency with such sufficient turnover. Currencies that have experienced death and rebirth usually have unlimited explosive power. At the same time, several leaders in the ecosystem at that time were formed in Sol, such as RNDR of Depin+AI, Depin Mobile, meme coin Bonk Wif Bome, etc.

Finally, the interests behind Sol are mainly from the United States, which launched the competition to expand its influence and interests in the crypto circle. There is no doubt that they are very good at playing and very powerful.

2. Bitwu.eth (@BTW0205): Learn to ignore the FUD about Ethereum

The essence is to focus on the main contradictions and ignore minor factors. You should learn to ignore the market FUD about Ethereum.

ETH is the foundation of financial innovation, SOL is not, and others are even less so;

The wealth effect generated by Ethereum can be extended to all other ecosystems;

Ethereum is the fertile ground for infinite possibilities. Think about why BlackRock launched the BUIDL fund on the #ETH network, and think about what actions the US banking system may take in this area as SAB 121 is about to be repealed.

3.Phyrex (@Phyrex_Ni): The funding side is only moderately optimistic about the market rising

A week later, the market value of stablecoins has risen along with the expectation of the Federal Reserve's interest rate cut. This is definitely a good thing. Compared with the decrease in the market value of USDT and USDC a week ago, the increase in market value shows that more investors are optimistic about the future trend of the currency market. Of course, this optimism is not very strong.

Judging from the USDT data, the market value increased by 590 million US dollars in one week. This figure is not much in the past five months, especially considering that USDT is used in the currency market at most half, so the impact on the market may be relatively limited. However, USDT will have a greater impact on ALT (Tokens other than #BTC and #ETH), so more USDT may bring about new sector rotation.

Compared with USDT, USDC will have greater support for BTC, ETH and even #SOL, which are more popular among American investors. In the past week, we have seen #Bitcoin spot ETF return from net outflow to net inflow, which also represents the gradual recovery of investment confidence of American investors. The increase of $390 million in the past week is not much either. After all, the current rise and fall depends on the attitude of the Federal Reserve.

In addition, judging from the funds deposited in the exchanges, many friends have been saying that the copycat season has not arrived. This is not without reason. We can see that a large amount of USDT is deposited in the exchanges. From the overall trend, except for a buying wave from March to April, the amount of deposits has been increasing. More funds are still waiting for changes in form and are not in a hurry to exit.

The movement of USDC in exchanges is relatively normal, which also means that American investors’ sentiment to buy #BTC and #ETH is higher than ALT.

In general, the increase in funds will help investors to be bullish on the future market, but it should be noted that the current price changes are still based on speculation about the Fed's interest rate cuts. Once the Fed has a clearer attitude, prices will also change accordingly.

@0xCryptoChan: The main bull market trend may start

On a large-cycle scale, the blue line turning upward often means the start of the main uptrend of the #BTC bull market. The current blue line may be turning upward. The black line in the figure is the BTC price; the blue line is the 365-day moving average of Bitcoin's realized loss (BTC: Realized Loss). Note: Realized loss (Realized Loss) refers to the total dollar loss (relative to the purchase cost) of BTC that moves in a loss state among the BTC that moves on the chain over a period of time.

According to Coinmarketcap data, the top five currencies in terms of 24-hour popularity are GME, PEPE, BEFI, PANDA, and BTC. According to Coingecko data, in the crypto market, the top five sectors with the highest growth are TokenFi Launchpad, HECO Ecosystem, Jobs, Transport, and Doge Ecosystem.

Focus: Interpretation of Fantom Upgrade: New L1 Network Sonic Network + Parallelized EVM + Native Token S New Combination

On May 18, Fantom community members initiated a series of governance proposals on the Sonic network, the main contents of which include: Sonic will be a brand new L1 chain, and will be bridged to chains such as Ethereum through native L2 cross-chain. According to the results of the first governance vote, FTM holders will be able to migrate to Sonic's native token S at a 1:1 ratio when Sonic is created. Using the new bridge architecture, Sonic will provide users and DApp developers with performance that is superior to the existing Opera network. Fantom Operations Ltd promises to continue to provide validator support for Opera, and Sonic Operations Ltd provides support for Sonic. The Fantom Foundation will also allocate hundreds of millions of dollars of FTM from the treasury to support the development of the Sonic ecosystem, including marketing, business development, and migration grants.

Previously, @FantomFDN revealed more details about Sonic Network. In short, the main contents include:

A new L1 blockchain, Sonic Network, featuring significantly improved network performance and a bridge to Ethereum’s L2 network (to unlock more liquidity);

Parallelize EVM (drawing on the hype ideas of Sei, Monad and other networks);

The new native token S, people can choose to convert FTM tokens into S at a 1:1 ratio (providing a two-way conversion bridge);

The Fantom Foundation will allocate at least $100 million worth of FTM tokens to support the subsequent development of the ecosystem;

Airdrop activities (serving Farmers in the form of staking).

In contrast, this network upgrade also exposed some existing problems of the ecosystem: 1) The current on-chain indicators of the Fantom Opera network (including active users, TVL, deployed contracts, etc.) are not very healthy; 2) As far as I know, there has been no successful case of minting new native tokens for the new L1; 3) I look forward to seeing more things related to NFT/GameFi, because the ecosystem was too focused on DeFi and Ponzi economics games in 2021 (such as Tomb Finance, Solidly ve 3, 3, etc.); 4) People are still afraid of cross-chain bridge attacks and are deeply hurt; 5) Blast, Scroll, Berachain, Monad and other upcoming or already launched L1 and L2 network ecosystems will continue to distract its attention.

@10X Research: Bitcoin will hit a new high if it breaks through 67,500

Bitcoin’s price action has shown significant improvement recently. The price rebounded to the resistance area of $67,500 in late April and surpassed the high of $64,000 in early May.

According to 10X Research, a breakout for Bitcoin could see it reach new all-time highs. The research firm’s Bitcoin ETF model supports these predictions.

1. Excluding interest rate hikes, Bitcoin has limited room for decline

The report highlights the importance of the $68,300 “floor.” A break above this level could spark a strong rally. Bitcoin is currently trading bullish, with $67,500 being the next key breakout level.

Selling pressure remains subdued. However, market structure and fundamentals remain challenged. Bulls are looking for a big story to spark investor interest.

Despite these challenges, Bitcoin’s downside appears limited. Inflation data is unlikely to rise significantly, and Federal Reserve Chairman Jerome Powell has ruled out the possibility of raising interest rates.

This environment is conducive to the resumption of Bitcoin ETF inflows by long investors. Multi-strategy funds may remain on the sidelines due to low funding rates and weak retail trading volumes.

2. Broke the downtrend

Bitcoin prices are expected to rise gradually, in stark contrast to the explosive gains seen earlier this year. Stronger U.S. equities and support from the U.S. presidential election cycle could bolster this bullish narrative.

Bitcoin closed the week at around $66,300, up more than 10% since May 13. Most of the price gains occurred on Wednesday, while the rest of the week showed relatively stable price action.

Cryptocurrency analyst Jelle agrees with 10X Research’s optimistic forecast, noting that Bitcoin has broken a local downtrend, reclaimed its previous cycle high, and is currently consolidating around $67,000.

“It’s time to push the clock back to the 1970s, or even further,” Yelle said.

3. Spot ETFs show net inflows

Matteo Greco, a research analyst at digital asset firm Fineqia, said last week’s positive price action was also driven by increased demand for BTC spot ETFs.

“After five weeks of low demand, resulting in cumulative net outflows of approximately $1 billion, BTC spot ETFs saw net inflows of approximately $950 million last week, reflecting a level of demand not seen since March,” Greco told BeInCrypto.

In addition, Santiment data shows that the total holdings of Bitcoin wallets holding less than 0.1 BTC have decreased by 0.46% over the past week.

“Historically, small wallets dumping coins into large wallets is an encouraging and bullish sign for BTC,” Santiment wrote.

@Haseeb: Why do highly valued and low-circulation currencies fall?

1. Why do these coins with low circulation and high fully diluted market capitalization (FDV) perform poorly?

Is there something wrong with the market structure? Are venture capitalists too greedy? Is this a rigged game targeting retail investors?

Almost every theory I've seen on this issue seems to be wrong. But I'll let the data speak for itself.

@tradetheflow_ is credited for this widely circulated chart showing how the latest batch of coins listed on Binance have all underperformed. Most of these coins are what are known as “high FDV, low circulation” tokens, meaning they have huge fully diluted valuations but low first-day circulating supply.

I plotted the chart of these coins and stripped the labels, excluding all explicit meme coins, and coins like RON and AXL that had TGEs (token distribution events) before Binance. Here’s what the chart looks like, with BTC (beta) in yellow:

Almost all of these "low circulation, high FDV" Binance listed coins are falling. What could be the reason behind this? Everyone has their own opinion on what is wrong with the market structure. The three most popular theories are:

➢ Venture capitalists/Key Opinion Leaders (KOLs) are selling to retail investors.

➢ Retail investors abandon these coins and buy meme coins instead.

➢ The supply is too small to allow for efficient price discovery.

All these theories sound reasonable! Let’s test them to see if they are correct. But for the sake of science, we need a null hypothesis to be falsified. Our null hypothesis here should be: these assets are just repriced, and there is no deeper problem with the market structure. (The classic “more sellers than buyers, over.”)

We will examine each theory one by one.

2. Venture capitalists/KOLs are selling to retail investors

If this is true, what characteristics should it present?

We should see tokens with short lock-up periods fall faster than others, while projects with long lock-up periods or no KOL involvement should perform well. (Liquid perpetual contracts may also be one avenue for selling.)

So, what does the data tell us?

From listing until early April, these tokens actually performed well - some were above the listing price, some were below the listing price, but most fluctuated around 0%. Before that, there didn't seem to be any venture capitalists or KOLs selling.

Then in mid-April, all coins fell together. Did these projects, despite being listed on many different dates, with different venture investors and KOLs, all unlock in mid-April and start selling to retail investors?

Let me get this straight. I'm a VC. There are absolutely some VCs that are selling to retail - some VCs are not abiding by lockups, OTC hedging, or even violating their lockup agreements. But these are lower-tier VCs, and most teams that work with these VCs can't get listed on a tier-one exchange. Every top tier VC you can think of has at least a one-year lockup and multi-year vesting period before they can get their tokens. The one-year lockup is actually mandatory for everyone by the SEC under Rule 144a. Also, for large VCs like us, our holdings are so large that we can't hedge them OTC, and we're usually contractually obligated not to do so.

So here’s why it doesn’t make sense: each of these tokens is less than a year from TGE, meaning that VC investors with a one year cliff are still locked in!

Maybe some lower VC projects sold tokens early on, but all projects fell, even those where the top VC investors were still locked up.

So investor/KOL selling may be true for some tokens - there are always some projects that misbehave. But if all tokens fall at the same time, this theory cannot explain it.

Next theory.

3. Retail investors angrily exit these coins and only buy meme coins

If this were true, we should see the price of these new token issuances fall as retail investors buy meme coins instead.

Instead, we see:

I compared SHIB’s volume to these baskets of tokens. The timings don’t match. The memecoin craze was already in full swing in March, but this basket was sold off in April, a month and a half later.

Here’s the volume on Solana DEX, telling the same story — meme coins exploded in early March, well before mid-April.

So that doesn't fit the data either. There wasn't a broad shift into memecoin trading after this basket dropped. People were trading memecoins, but they were also trading new coins, and the volume didn't tell any clear story.

The problem is not the volume but the price of the asset.

That said, many are trying to sell the story that retail investors are disillusioned with real projects and are now primarily interested in memecoins. I went to Binance's Coingecko page and looked at the top 50 most traded tokens, and about 14.3% of Binance's volume is in memecoin pairs. Memecoin trading is a minority in crypto. Yes, financial nihilism does exist and is very prominent in CT, but most of the world still buys tokens because they believe in some technical story, whether it's right or wrong.

So, okay, maybe it wasn’t literally retail moving from VC to meme coins, but here’s a sub-theory: VCs owned too much of these projects, and that’s why retail rage-quit. They realized in mid-April that these were scam VCs, and the team + VCs owned ~30-50% of the token supply. That must have been the straw that broke the camel’s back.

It’s a satisfying story. But I’ve been investing in the crypto VC space for a while. Here’s a snapshot of token distribution from 2017-2020:

Look at those red shaded areas - that's the share that insiders (team + investors) got. SOL 48%, AVAX 42%, BNB 50%, STX 41%, NEAR 38%, etc. The situation today is very similar. So if the theory is "the token was not a VC before, but is now", this also does not match the data. Capital-intensive projects always have excessive ownership by teams and investors at launch, regardless of the cycle. These "VC coins" later become success stories, even after the tokens are fully unlocked.

As a general matter - if what you are pointing to also happened in the last cycle, then it cannot explain the unique phenomenon that is happening now.

So this “retail investors rage quit and start trading meme coins” story rings true and is a nice satire, but it doesn’t explain the data.

Next theory.

4. Supply is too small to allow price discovery

This is the most common view I’ve seen. It rings true! It’s less sensational, which is its advantage. Binance Research even published a great report on this issue:

It looks like the average is about 13%. That's obviously low, obviously much lower than tokens have been in the past, right?

Is it right?

Credit to @0xdoug for compiling this data. The average circulation of these tokens at the time of the TGE in the last cycle was - you guessed it - 13%.

The same Binance Research report also has a chart circulating, claiming that the average circulating supply of tokens launched in 2022 is 41% at the time of listing.

I'm sorry - what? My Christian brother, I was there in 2022 and the project was not listed with 41% of the circulating supply.

I checked Binance's 2022 listing list: OSMO, MAGIC, APT, GMX, STG, OP, LDO, MOB, NEXO, GAL, BSW, APE, KDA, GMT, ASTR, ALPINE, WOO, ANC, ACA, API3, LOKA, GLMR, ACH, IMX.

Spot checking a few of them, as not all of them have data on TokenUnlocks: IMX, OP, and APE Similar to the latest batch of coins we’re comparing, IMX had a 10% day one circulation, APE had a 27% day one circulation (but 10% of that is the APE vault, so I rounded it up to 17% circulation), and OP had a 5% day one circulation.

On the other hand, you also have LDO (55% unlocked) and OSMO (46% unlocked), but these had been operating for over a year before Binance listed them, so it would be silly to compare those listings to this batch of day one listings. If I had to guess, these non-day one listings plus random enterprise coins like NEXO or ALPINE are what got them to this crazy high number. I don’t think they are identifying a real trend in TGEs — what they are identifying is a trend in the types of tokens that Binance lists each year.

OK, then maybe you'll admit that 13% of circulating supply is similar to past cycles. But that's still too little to allow for price discovery, right? The stock market doesn't have this problem.

After all, look at what the median IPO float was on the first day of listing in 2023. Oh. It was 12.8%. (Thanks @0xdoug)

Seriously, extremely low circulating supply is definitely a problem. WLD is a particularly bad example of this, with a circulating supply of only 2%. FIL and ICP also had extremely low circulating supply when they were listed, which made their price charts very ugly. But for most of the coins listed on Binance, their first-day circulating supply is actually in the historically normal range.

Also, if the theory is correct, you should see the coins with the lowest circulation getting hit, while the coins with higher circulation should be doing OK. But we don't see a strong correlation. They are all going down.

So this lack of price discovery story sounds compelling, but having looked at the data, I’m not convinced.