Source: Talk Li Talk Outside
The market continued to be lively today, with most people seemingly in an optimistic stage, and many people have started to believe that the bull market has arrived again. In the morning, Bitcoin continued to break historical records, reaching around $89,000.
Many analysts attribute the rapid rise of Bitcoin today to the push of MicroStrategy. It is reported that on the evening of November 11, MicroStrategy (MicroStrategy) announced that it had purchased 27,200 bitcoins between October 31 and November 10, spending about $2.03 billion, with an average purchase price of about $74,463 per bitcoin. The funds for this purchase came from the company's ATM stock sales activities. As of now, MicroStrategy's total holdings have reached 279,420 bitcoins, with a total purchase cost of about $11.9 billion and an average purchase price of about $42,692 per bitcoin. Based on the current Bitcoin price of $89,000, MicroStrategy's Bitcoin holdings have an unrealized profit of about $12.9 billion.
Of course, more people are also paying attention to the market's future trend. If we simply refer to the weekly line, the BTC is generally still bullish, but we also need to pay attention to the short-term volatility risk and try to stay away from leveraged contracts as much as possible.
Regarding the topic of Bitcoin's market performance, we have already had some perspectives and thoughts in the previous articles of Talk Li Talk Outside. In this issue, let's continue to talk about the issue of Altcoins.
As mentioned in our previous article, with the upcoming changes in BTC.D (BTC Dominance), and perhaps the further interest rate cuts by the Federal Reserve, coupled with favorable macroeconomic conditions, when a large amount of new liquidity flows into the market, Altcoins may also experience a new round of growth and continue for a period of time.
However, it is worth noting that too many Altcoins have been born in this cycle, which is clearly a case of oversupply. Even if we welcome a new round of Altcoin season, not all Altcoins will have the opportunity to grow, or it may only be a small part of the Altcoins that will have the opportunity for a relatively large increase.
Here we may need to further understand the concept of Altcoins:
Many people will refer to all cryptocurrencies (currently there are about millions of cryptocurrencies on the chain) other than BTC as Altcoins, and call ETH the "King of Altcoins".
But Altcoins can be further divided into two main types from their essence: Altcoin Cryptocurrencies and Altcoin Tokens.
Although this division may seem the same, the underlying logic is actually different. Altcoin Cryptocurrencies mainly refer to those tokens that can provide development momentum support for the blockchain network, while Altcoin Tokens are mainly to provide momentum for the development of protocols or dApps, and such tokens are also usually issued on different blockchain networks.
Altcoin Cryptocurrencies:
For example, the well-known ETH and SOL belong to Altcoin Cryptocurrencies. This type of token can run on its own blockchain (Ethereum) based on its own protocol, and the token can also serve as the source of Gas (or payment). Their growth demand is often reflected in actual transactions, active users and revenue, and they may also have a strong token economics that can further stimulate their demand and have a sustained impact on their prices. This type of token is easy to understand, and we won't go into too much explanation here.
Altcoin Tokens:
For example, the well-known UNI and LINK belong to Altcoin Tokens. This type of token is a Crypto asset issued on a specific project, and they may not necessarily run on their own blockchain. The use of tokens corresponding to different protocols may also be different, some may be used for payment purposes, but more commonly they are used for DAO governance. To put it bluntly, the main purpose of creating most of these tokens is to provide exit liquidity opportunities for early project investors.
Let's elaborate on Altcoin Tokens. This type of token is often not very friendly to most retail investors, just look at the partners around you who have been trapped. Unless the following situations occur:
The first situation is when the DAO has a large amount of funds, the protocol can generate strong revenue, and the project party is willing to share the revenue with token holders in the form of actual earnings through staking rewards (driven by system incentives), the corresponding governance tokens may have potential appeal (or certain development potential), and this appeal will ultimately be reflected in the token price.
The second situation is when the market is in an upward trend, such as during a bull market, when the atmosphere of speculation and FOMO is strong, some tokens may be used by market makers for manipulation and price manipulation.
Of course, in the crypto field, many concepts seem to lack unified definitions or classifications, and for Altcoins, different people may have different understandings. The division method we mentioned above is just a starting point for further thinking, and you can think about it further based on your own understanding.
After understanding the basic concept of Altcoins, if you want to participate in trading, we still need to try to avoid investing too heavily in the following three types of Altcoins:
1. Old and stale projects
Many old projects have little continuous innovation, and their valuations are still a bit high. It is difficult for this type of project to have greater upside potential. From a longer-term perspective, the tokens corresponding to this type of project currently do not see much future, and they seem to have been abandoned by the rapidly changing market, so it is best to stay away from those old projects without innovation, incentive systems, or marketing capabilities.
2. High unlocking projects
The token supply of such projects is basically controlled by the relevant interest groups of the project party, and the token prices are also easy to be manipulated. If you don't have a strong grasp or inside information, blindly participating in it is very likely to become a bagholder, and once the market situation reverses, these tokens are often the fastest and most severe to fall.
3. Outdated narratives
Before the start of this bull market, many people still had fantasies about narratives such as NFT, P2E, and metaverse, but with the popularity of new hot narratives such as BRC20, RWA, AI, and MEME, those once-popular narratives are now receiving less market hype. Moreover, many projects under the past hot narratives also have low liquidity and high FDV, which may be accompanied by continuous selling pressure. Many partners who entered the market in the last bull market have been trapped for several years, and now they finally wait for the new round of bull market, but many of them cannot even break even.
Based on the above understanding, following the principle of "don't touch what you don't understand", the next step is to enter the specific project selection and research work:
Project research can be divided into many aspects, and interested partners can directly obtain the "Project Research Template" through the "Talk Li Talk Outside Toolbox" for classified understanding. Here we will only briefly mention a few key points that may need attention, including the project's narrative ability, MC/FDV ratio, unlocking situation, and community building, in order to understand and evaluate the upside potential of the project.
Here's a simple example (not as any investment advice, just providing a specific analysis approach and method):
For example, you think that with the formal inauguration of Trump in January next year, there may be some new changes in the regulation of the crypto field, and the DeFi narrative may receive some capital attention and hype. You want to find some good targets under the DeFi narrative. Then you see AAVE, but you don't know if you should buy this coin or not, what should you do?
First, through our previous analysis, you should now clearly know that AAVE is an Altcoin project. The use of the AAVE token is relatively limited, currently mainly focused on two aspects: one is as a governance utility token, where AAVE holders can vote on proposals or initiate new proposals that can affect the protocol's risk parameters, incentive measures, product improvements and upgrades; the other is as a staking utility token, where AAVE holders can choose to allocate their tokens to the protocol's security module, and AAVE stakers will receive corresponding rewards (according to the website, they are currently pushing forward a new revenue distribution proposal). Therefore, currently, one of the core driving force indicators for the token price is Fees (protocol fees), because stakers will be able to receive more AAVE tokens, as well as a certain proportion of the protocol fees, which will stimulate the demand for AAVE tokens and generate more appeal. Fees directly translated means the cost, which may be a bit confusing for newcomers. We can simply understand it as the fees paid by users (conversely, it is the revenue of the protocol), mainly used to assess whether users are willing to pay to use the protocol, or whether the protocol has a product-market fit. If you still can't understand it, let me put it in simple terms - you can just treat Fees as the total revenue generated by the project. Another concept that is often associated with Fees and appears at the same time is Revenue, which can be understood as the portion of the fees retained by the protocol. In simple terms, you can think of it as the income that the protocol earns for providing the relevant services, which also represents the actual revenue-generating capability of the project. If we use a simple formula to explain it, it would be: Fees = Revenue + Other Revenue Items (different projects may have different revenue design models). Next, let's further look into the historical data of AAVE: Aave currently holds a 67% market share in the DeFi lending sector, occupying a leading position in this niche. During the 2021 bull market, AAVE's annual revenue (Fees) was $343 million, and the ATH price of the token that year was $666. By 2024, AAVE has already achieved $320 million in revenue, and if we estimate based on the $32 million in revenue in the past month (October), their revenue this year will definitely break a new historical high, as shown in the figure below. Looking at the token price, AAVE is currently priced at $188, still a 71.7% drop from the ATH. So if you still believe that Fees is an effective core driving indicator, then theoretically, AAVE may have about a 3x upside potential. Furthermore, we can further combine other indicators to assist in the judgment. For example: AAVE's MC/FDV ratio is currently 0.94. The current circulating supply of AAVE is 14.9 million, accounting for the vast majority of the total supply of 16 million tokens, and there are also about 1 million tokens left in the protocol's treasury, used for staking rewards and liquidity provider incentives. In other words, AAVE tokens are currently in a state of near-full circulation, and there will be no large-scale token unlocks in the future. AAVE's MC/TVL ratio is currently 0.16. Generally, the smaller this ratio, the more undervalued the project may be, and interested participants can make a comparative table with similar DeFi projects. Of course, we can also analyze the trend of the K-line at the same time. Furthermore, we can also look at some news, such as: Aave has proposed to integrate BlackRock's tokenized fund BUIDL into its GHO stablecoin module (GSM), which could diversify Aave's revenue sources and increase its RWA exposure. Aave has hinted several times in recent months that it will consider expanding to the Solana network. And so on... After the above analysis from different angles, I guess you should have a further understanding of the project. Finally, whether to participate in specific trading or not depends on your personal plan and position management. However, I need to remind you again that the above is just an example, not an investment recommendation, but rather to provide a specific analysis approach and method, mainly to inspire you to think further.
