In the deep winter of 2018, I was inspecting a photovoltaic power station in the Gobi Desert of Qinghai. In the -20°C wind, the chief engineer pointed to the rows of idle photovoltaic panels and said, "These are the legacy of the last round of expansion. Once the market has cleared, new technologies will emerge." At that moment, gazing at the Altcoin rankings on Binance, the sideways K-lines of those projects were strikingly similar to the photovoltaic panel arrays back then.

The crypto market is experiencing the same cyclical patterns as traditional industries. Just as the 2012-2016 photovoltaic industry went through a brutal elimination process, the CEX Altcoin market has now entered a ruthless clearing stage: the daily trading volume of many 2021 star projects has fallen below $10 million, and their FDV has plummeted by over 70% from the peak. This mirrors the trajectory of blue-chip stocks in the photovoltaic, internet, and coal industries plummeting from triple-digit prices to penny stocks.

But behind the cruelty of the cycle lies a silver lining. Just as Longi Solar bet on monocrystalline silicon technology at the industry's nadir, the darkest moment of the Altcoin market is now giving birth to the forces that will break the deadlock:

1. Reconstruction of the Valuation Logic: VC's "Paper Wealth" and Leveraged Liquidation

At the peak of the 2021 bull market, venture capitalists (VCs) were like speculative hoarders of coal:

• Valuation Bubble: The median valuation of VC-backed seed-stage projects reached $82 million (Messari 2022 report), a 16.4x expansion from the 2017 cycle (compared to only $5 million for similar projects in 2017), causing the tokens to be overpriced by 10x when listed on CEXes;
• Leveraged Blowups: Institutions like Genesis provided 100% LTV BTC-collateralized loans, fueling an arbitrage loop: institutions collateralized BTC to obtain stablecoins, then deployed them into high-beta Altcoins. Traders could leverage BTC to buy Altcoins, creating a false prosperity. But with the 2022 Genesis blowup, the 2022 collateral value breach of the liquidation line triggered a cascade of liquidations, severing this "capital artery" and turning the Altcoin market into a slaughterhouse for primary market garbage stock selloffs.

2. Ongoing Clearing: The Crypto Industry Clears Faster Than Traditional Industries

After two years of shakeout, we can observe the following market signals:

• Market Sentiment Bottoming: The average market cap of CEX Altcoins has already approached 2020 levels, with the market caps of many 2022-2024 listings shrinking over 80%; the retail exit rate has reached a historical peak, with the 90-day active address ratio of retail holders dropping to 12.3% (Santiment), near the historical low; the CEX Altcoin Fear and Greed Index has remained below 20 for 15 consecutive weeks, reaching the 2020 March bottom.
• New Frontiers Emerging: While traditional market makers have contracted, new mechanisms like base-quote pairs, on-chain DEX liquidity pools are rebuilding the leverage flywheel. AI and Crypto, Compliance and Crypto are also attempting to nurture new industry dynamics.

Conclusion: The current Altcoin market resembles the coal stocks around 2015 - rapid capacity clearance, plummeting market enthusiasm, where neither bullish nor bearish news can trigger industry fluctuations anymore, facing the cannibalization of emerging sectors (DEXes) in the eyes of the entire market. But there is nothing new under the sun, and the primary principles of investing - liquidity and cheapness - remain eternal. Buried in the ruins are undervalued gems, and we believe quality projects will emerge and shine through the industry clearing process.

The Crypto Capital War: CEX Valuations Enter a Volatile Bottom-Seeking Phase, Glimmers of Hope in the DEX New Frontier

1. CEX Predicament: VC Poison Pill Unresolved, Clearing Enters the Second Half

The Altcoins on centralized exchanges (CEXes) are essentially the "bagholders" of the primary market valuation bubble:

• Pricing Power Dispute: Projects that VCs invested in at $1 billion valuations now only command $100 million market caps on the secondary market, a $900 million "valuation gap" (e.g., a project with a $20 million seed round valuation now has a $4 million market cap after listing on Binance);
• Capital Stagnation: The $17 billion inflow from BTC ETFs cannot be leveraged by market makers as in the past due to tightened risk controls, leaving the capital stranded in new trading venues, turning CEX Altcoins into a "dried-up riverbed" entering a negative feedback loop of loss-making effects.

2. DEX Breakthrough: The Secondary Pricing Power Revolution

Decentralized exchanges (DEXes) are rewriting the rules of the game:

• Traditional Path: VC Pricing → CEX Listing → Retail Bagholding
• Inverted Valuation: On DEXes, retail can buy the full circulating tokens at 1/10 the price of VCs
• Valuation Reconstruction Mechanism: DEX markets discover prices through AMM algorithms, with typical projects listing at a 73.5% lower premium than CEXes (Dune Analytics); DEX liquidity siphoning is catalyzing a new asset pricing paradigm: Community Consensus → DEX Liquidity Proof → Passive CEX Listing
• Consensus Fission: When niche concepts (like AI Agents) spread to the mainstream through community propagation, the token circulation shifts from "Whales vs. Retail" (PvP) to "Incremental Inflow" (PvE). Typical cases:
  • Virtual: From a DEX micro-circle breakout to being added to the Grayscale watchlist, its market cap surged 20x in 3 months;
  • AI16Z: A community project mimicking a16z's investment logic attracted traditional tech capital.

Core Logic: CEXes are "state-owned enterprises shedding liabilities", while DEXes are "private enterprises backdoor listing" - the former relies on policy rescue, the latter on grassroots movements.

CEX vs. DEX: Two Sets of Survival Rules, Two Codes of Wealth

1. CEX Strategy

• Picking Cigarette Butts: Only buy projects with a market cap of $5-20 million, with real products and communities, and where the project team retains core pricing power, avoiding "penny stocks" (daily volume < $1 million);
• Waiting for Industry Cycles: Referring to the history of coal stocks, plan for 2025-2026, wait for the liquidity easing cycle to realize the return on market cap recovery, capturing core industry trend targets (e.g., buying MKR at $200 in 2020, selling at $6,000 in 2021);
• Liquidity Arbitrage: In continuous market trends, fully circulating tokens often exhibit linear changes in liquidity support across different CEXes, and there are often mispricing opportunities in the valuation range during sentiment bottoms, which can be used for liquidity and sentiment arbitrage. At this moment, we believe ETH has significant mispricing opportunities, leveraging the USD system liquidity that it shares with Bitcoin.

2. DEX Strategy

• Early-Stage Sniping:
  • $5-20 million market cap: Focus on team background, Github code/product quality, token distribution signals;
  • $20-50 million market cap: CEX listing expectations (e.g., a DeFi project being added to Binance's watchlist led to a 300% DEX price surge);
• Community Empowerment: Observe Meme coin consensus building, using the AI Agent sector as an example - each 1-unit increase in the token's Social Finance Index (mentions on social platforms/market cap) corresponds to a 47.8% alpha (LunarCrush data), capturing the key inflection point of PvP to PvE;

Conclusion

In the dusk of the Qinghai photovoltaic base, the new generation of bifacial modules are charging up in the sunset glow. The Altcoin market is a giant gold mine, but most people come in with dreams of striking it rich and leave with mere pebbles.

The cyclical gears of the crypto market have never stopped turning, and those projects that have honed their weapons in the cold winter will ultimately shine the brightest when the dawn of liquidity breaks. What we need to do is simply like seasoned miners - calibrate the compass when others abandon the pit, and stock up on ammunition before the industry awakens. Only by combining the patience of a coal miner, the ruthlessness of a gambler, and the computing power of an accountant can we dig out the real gold from the ruins. Remember: the bull market is the stage for realizing profits, and the bear market is the battlefield for collecting chips - and now is the golden moment to shoulder the basket and pick up the ore, firmly bullish on the ETHBTC exchange rate for trading opportunities and the golden opportunity to build positions in Altcoins in the coming year.