The life cycle of most new tokens is very short, with over 99% of Altcoins typically based on meme, becoming inactive over time, and thus not attracting significant liquidity.
Since 2017, the crypto market has grown 20-fold, nearly tripling by early 2021, reaching unprecedented heights. However, the driving factors of market dynamics go far beyond just liquidity. Similar to traditional financial markets, the rise in asset prices is determined not only by the availability of capital, but also by investor sentiment and speculative behavior. In the crypto market, investors' expectations of future returns often drive up token prices.
Concerns about token unlocking causing market dilution have been exaggerated. It is estimated that by 2025, the total amount of token unlocking will be $75 billion, far lower than the $137 billion during the 2021 Altcoin season. Therefore, the market's liquidity concerns may not be as severe as some have suggested.
Some believe that without the support of central bank expansionary monetary policy, Altcoins are unlikely to continue to rise. However, historically, the rise of Altcoins has often occurred when the Federal Reserve has injected liquidity into the financial markets by expanding its balance sheet. This means that the rise in asset prices is driven not only by liquidity, but also by market sentiment and expectations.
Rallies often start with the expectation of loose monetary policy, rather than actual liquidity injection. Risk appetite and speculative behavior are key factors in the volatility of the crypto market, and investors can still drive the rise of Altcoins through large-scale speculation, even without direct intervention by the Federal Reserve.
Furthermore, while some capital is on the sidelines, many investors still hold cash, waiting for the right time to re-enter the market, indicating that liquidity has not been completely constrained. Although the launch of the Bitcoin spot ETF has injected a large amount of capital into Bitcoin and raised concerns about institutional capital bypassing Altcoins, Altcoins have still shown strong growth. For example, major Altcoins like SOL have performed remarkably well.
If you feel helpless or confused in the crypto market right now, I hope my sharing can provide you with some inspiration and help!
Finally, there is much more that has not been written, such as specific opportunities and decision-making, which are often not something that can be summarized in a single article.
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