Source: Coin Market Operator
After consecutively hitting new price ATHs, Bitcoin has reached a clear profitability divergence point in this bull market: on one hand, Wall Street entity MSTR has been frantically scooping up Bitcoin, accumulating a total of $12 billion worth; on the other hand, long-term investors who have held for over 6 months have been continuously selling Bitcoin at a rate of 25,600 coins per day. The last time such a bull-bear divergence occurred, Bitcoin entered a 5-month consolidation period, with the price retracing from the high of $73,700 to $49,000. Therefore, the long-term investors' selloff has also triggered market concerns about an adjustment.
It is worth noting that the long-term investor selloff since September is significantly different from the March-May period. Firstly, the main sellers in September were investors who had held for 6 months to 1 year, accounting for 35% of the selloff; while in March-May, the main sellers were investors who had held for 1-3 years, accounting for 53% of the selloff. The former reflects more of a profit-taking on short-term gains (the market rose too quickly), while the latter is more like a wavering of believers. Therefore, the washout cycle of the former will be significantly shorter than the latter. Secondly, the scale of the selloff since September has been 507,000 Bitcoins, far lower than the 934,000 Bitcoins in March-May. The weakening of the selling momentum means that the amplitude of the consolidation will also be smaller. In other words, although a periodic adjustment in Bitcoin is inevitable, compared to the previous adjustment, the new round of adjustment will be more moderate.
If we were to predict the price range and cycle of the adjustment, the author believes that the most likely scenario is that Bitcoin will fluctuate between $88,000 and $105,000 within the next six weeks. The $88,000 lower limit is based on the average price of MSTR's first major increase after announcing a $42 billion increase plan; the upper limit is based on the pricing of the Barclay Bitcoin ETF options: institutions generally expect that Bitcoin is unlikely to break through $105,000 before January 17th (before Trump's inauguration).
During the Bitcoin consolidation period, market funds have begun to shift their breakthrough focus to Altcoins. Over the past week, the market share of Altcoins has risen from 8.91% to 11.0%, and the daily trading volume ratio has also risen from 23% to 37%.
CoinMarketCap data shows that from August 5th to December 1st, the median increase of the top 100 coins by market cap was 106%. Although most Altcoins have already doubled in price, most of the bag holders are still numb. The reason is that the current valuation of the vast majority of coins is still below the 80th percentile of their historical values, and the prices are still below the 90th percentile. Therefore, the main force has not encountered too much resistance in completing the first stage of the pull-up. For example, the intraday charts of Altcoins like DOT and SAND often show exaggerated "peak rushes", indicating a strong willingness of funds to actively buy in, but the market selling liquidity is not sufficient. This is also the reason why the author has repeatedly emphasized the need to change the past bear market mindset for Altcoins.
Unlike the past, where small-cap new coins were chosen to break through, the leaders of this round of Altcoin rally are large-cap coins like XRP, Doge, and ADA, a scenario that has only occurred in the 2020-2021 bull market. The fact that funds dare to deploy Altcoins on a large scale and in an all-round way must mean that they have grasped the changes in the market's wind direction in advance. This also indicates that the potential policy-driven benefits for the crypto market after Trump's victory may far exceed market expectations.
Although the large-cap old Altcoins have shown a strong money-making effect, the fact that their market caps can grow by hundreds or even thousands of billions of dollars with each doubling also means that their ceilings are ultimately not high. Therefore, the old Altcoins' price pull-ups have played more of a role in raising the overall valuation level of Altcoins and igniting market sentiment. The projects that can truly obtain high valuation premiums in each bull market are often closely related to the narrative of growth.
In the context of the market's strong aversion to high FDV new coins, the next-generation Altcoins issued in 2020-2021 are most likely to become the new breakthrough for funds, mainly for the following reasons:
1. Complete baptism of the bear market cycle: All these coins have gone through a complete bear market cycle, and their valuations have been sufficiently deflated. At the same time, the circulating rate of most coins is above 80%, and the VC shares have mostly been unlocked within three years, leaving a relatively clean market.
2. Capital sedimentation effect: Historically, each round of large-scale capital investment has usually produced a sedimentation effect. For example, after the bursting of the 2000 Internet bubble, the industry experienced a three-year bear market, but ultimately 12% of the companies were reborn and entered a long-term bull market. 2020 to 2021 was the peak of the crypto investment journey, but so far only the SOL project has completed its transformation, which is far from enough. In addition, the second bull market was not accompanied by a technological revolution, and many new projects are still following the path of technological improvement, which means that the projects from the previous cycle still have first-mover advantages.
Historically, the most prominent feature of the first stage of an Altcoin rally is indiscriminate scooping up, eliminating low prices. Subsequently, the market will enter a full reshuffle stage, and coins with sound fundamentals will receive additional boosts in the second stage. In terms of target selection, the author still recommends allocating to the old kings and DeFi leaders.
