A reader asked what to do if copycats remain languishing after Bitcoin reaches $100,000?
This issue is worthy of in-depth thinking, because the current trend of the US stock market reflects a similar situation.
Before referring to the U.S. stock market, let’s first review the crypto market.
Investors who have experienced previous bull markets should have this memory: in past bull markets, when Bitcoin and Ethereum continued to rise, Altcoin would usher in their own spring as long as their fundamentals were not too bad or their teams were too weak.
But it is obvious that in this round of market in the past six months, Bitcoin has broken through the previous high of 69,000 US dollars, but most of the Altcoin are still only in a state of slight increase or even stagnation.
Based on past experience, this phenomenon can be considered as indirect proof that it is not a bull market yet.
However, this phenomenon also makes people wonder whether another situation may occur:
That is, the basic logic of the market has changed unknowingly: even if Bitcoin and Ethereum both break through their previous highs and enter a bull market, most Altcoin will remain flat or only rise slightly, and will no longer reproduce the flourishing situation of the previous bull market.
This logic has been increasingly clearly verified in the U.S. stock market. The trend of the U.S. stock market in recent years is clearly this situation: except for the stocks of several major technology giants, most U.S. stocks are basically sluggish or have limited gains.
Regarding this phenomenon, I remember that in 2019 or earlier, some well-known fund managers said that the US stock market had already had a big bubble. Their basis was that the stock prices of several major technology giants had risen very high, approaching the situation before the Nasdaq crash in 2000.
But in the years that followed, except for a brief plunge in U.S. stocks in 2020 due to the interference of the epidemic, U.S. stocks continued to advance rapidly under the leadership of several major technology giants, continuously pushing the three major indexes to new highs.
As a result, more and more Wall Street managers changed their views.
The new view is that:
The surge in the stock prices of several major technology giants is supported by strong performance. Compared with the growth rate of their performance, their stock price bubbles are not obvious;
In addition, when bubbles occurred in the U.S. stock market in the past, the prices of all types of stocks would skyrocket, but this phenomenon does not exist in the U.S. stock market today, because a large number of stocks with unsatisfactory performance are still ignored.
Therefore, although the US government has been releasing money in recent years, the money released has not flooded any stocks, but has continued to flow into high-quality stocks. This market where blue chip stocks are soaring and junk stocks are still lying flat is not as serious as people imagine.
Therefore, as long as the performance of several major technology giants continues to be impressive, the U.S. stock market will still set new highs.
I think this way of thinking is very instructive for us to think about the problem raised by this reader.
Now that the Bitcoin ETF has been approved, assuming that the U.S. Securities and Exchange Commission will approve the Ethereum ETF in the future, which types of funds will the traditional funds that may enter the market in large numbers mainly buy?
I think that in terms of liquidity, security and reliability, they are likely to focus mainly on Bitcoin and Ethereum.
This is just like how Wall Street capital chases after technology giants.
If this conjecture is confirmed, then the crypto market may indeed see a situation where Bitcoin or Bitcoin and Ethereum soar, but other altcoins are unpopular.
Of course, when I say that copycats are unpopular, I don’t mean that all copycats will not increase in value. Rather, I mean that many copycats that have nothing to show for themselves may no longer rise as fast as the market did before.
Therefore, it may be necessary for us to adjust our judgment methods in the bull market.
In the past bull markets, I judged the enthusiasm of the bull market by not only looking at Bitcoin and Ethereum, but also paying close attention to the altcoins. Once I found that the growth of the altcoins was too exaggerated, I would also regard it as an indicator of whether the bull market had already reached a very high risk.
But in the next bull market, I will pay more attention to Bitcoin and Ethereum. If I feel that there is still room for growth in these two, I will continue to hold them; if I feel that there is no room for growth in these two, I may not care about the performance of other altcoins and consider exiting.
