Author: Metrics Ventures

In the deep winter of 2018, I was inspecting a photovoltaic power station in the Gobi Desert of Qinghai. In the minus 20-degree cold wind, the chief engineer pointed to the rows of idle photovoltaic panels and said, "These are the legacy of the last round of expansion. Only when the market clears will new technologies break ground." At this moment, gazing at the Binance altcoin list, those K-lines that have been stagnant for a long time are surprisingly similar to the photovoltaic panel arrays of that year.

The crypto market is experiencing a cyclical recurrence that is no different from traditional industries. Just like the elimination rounds of the photovoltaic industry from 2012 to 2016, the CEX altcoin market has entered a brutal clearing phase: the daily trading volume of many star projects from 2021 has fallen below ten million dollars, and the median FDV has evaporated by more than 70% from its peak. This is akin to the trajectory of photovoltaic, internet, and coal giants falling from hundred-dollar stocks to penny stocks.

However, the cruel side of cyclical laws always hides great gifts. Just as Longi Green Energy bet on monocrystalline silicon technology at the industry's low point, the current darkest moment of the altcoin market is nurturing the momentum for breakthroughs:

1. Valuation Logic Reconstruction: VC's "Paper Wealth" and Leverage Strangulation

At the peak of the bull market in 2021, primary market VCs were like speculative traders hoarding coal:

• Valuation Bubble: The median valuation of seed-stage projects by venture capital (VC) reached $82 million (Messari 2022 Annual Report), expanding 16.4 times compared to the 2017 cycle (comparing similar projects in 2017 at only $5 million), leading to tokens being over-leveraged by ten times when they went live on CEX;
• Leverage Explosion: Institutions like Genesis provided 100% LTV BTC collateral loans in the previous cycle, creating an arbitrage loop: institutions collateralize BTC → obtain stablecoins → allocate high-β tokens. Market makers could collateralize BTC to buy altcoins, creating a false prosperity. But with the collapse of Genesis in 2022, the value of collateral fell below the liquidation line, triggering a chain liquidation, and this "funding lifeline" was severed, turning the altcoin market into a slaughterhouse for primary market sell-offs of junk stocks.

2. Clearing in Progress: The Crypto Industry's Clearing Cycle is Always Faster than Real Industries

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

• Market Sentiment at the Bottom: The average market cap of CEX altcoins has already approached the levels of 2020, with multiple projects listed from 2022 to 2024 seeing their market cap shrink by over 80%; the retail exit rate has reached a historical peak, with the 90-day activity of retail holding addresses dropping to 12.3% (Santiment), close to historical lows; the CEX altcoin fear and greed index has remained below 20 for 15 weeks, reaching a low not seen since March 2020.
• New Tracks Being Nurtured: Despite the contraction of traditional market makers, new mechanisms such as parent-child coins and on-chain DEX pools locking liquidity are rebuilding the leverage flywheel channel, with AI and Crypto, compliance and Crypto attempting to nurture new industrial momentum.

Conclusion: The current altcoin market resembles coal stocks around 2015—capacity clearing is progressing rapidly, market enthusiasm is declining swiftly, and both negative and positive news can no longer trigger industrial fluctuations. It also faces the siphoning of liquidity by alternative sectors (DEX) in the eyes of the entire market. However, there is nothing new under the sun; the first principle of investment is always liquidity and cheapness. Hidden within the ruins are mispriced gold mines, and we believe that quality projects are just waiting to shine through the industry's clearing.

The Dark Battle for Altcoin Funding: CEX Valuation Enters a Phase of Fluctuation and Bottom-Seeking, DEX New Frontier's Dawn

1. CEX Predicament: VC Poison Pill Not Dissolved, Clearing Enters the Second Half

CEX altcoins are essentially the "buyers" of the primary market valuation bubble:

• Pricing Power Struggle: Projects that VCs invested in at a $1 billion valuation in 2021 are now only recognized by the secondary market at a $100 million market cap, with the $900 million gap becoming a "valuation gap" (case in point: a project with a seed round valuation of $200 million had a circulating market cap of only $40 million after going live on Binance);
• Capital Backwater: The BTC ETF brought in $17 billion of incremental funds, but due to tightened risk controls, market makers can no longer leverage BTC as they did in the past, causing funds to be trapped in new trading venues, and CEX altcoins have become "dry riverbeds," entering a negative feedback loop of losing money.

2. DEX Breakthrough: Secondary Pricing Power Revolution

Decentralized exchanges are rewriting the rules of the game:

• Traditional Path: VC pricing → Exchange listing → Retail buy-in
• Valuation Inversion: On DEX, retail investors can buy fully circulating tokens at 1/10 the price of VCs.
• Valuation Reconstruction Mechanism: The DEX market achieves price discovery through AMM algorithms, with typical projects having a listing premium rate 73.5% lower than CEX (Dune Analytics); DEX siphoning liquidity from CEX is creating a new paradigm for asset pricing: community consensus → DEX liquidity proof → CEX passive listings.
• Consensus Fission: When niche concepts (like AI Agents) become mainstream consensus through community dissemination, the flow of chips upgrades from "mutual cutting between market makers and retail" (PvP) to "incremental inflow" (PvE). Typical cases include:
  • Virtual: From a small circle on DEX to being included on Grayscale's watchlist, with a market cap increase of 20 times in three months;
  • AI16Z: The community mimics a16z's investment logic to package projects, attracting traditional tech sector funds.

Core Logic: CEX is "state-owned enterprises shedding burdens," while DEX is "private enterprises going public through shell companies"—the former waits for policy bailouts, while the latter relies on grassroots movements.

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

1. CEX Strategy

• Picking Up Cigarette Butt Stocks: Only buy projects with a market cap of $5 million to $200 million, with real products and communities, and where the project party holds core pricing power, avoiding "penny stocks" (daily trading volume of $1 million);
• Waiting for the Industrial Cycle: Referencing the history of coal stocks, plan for 2025-2026, waiting for the liquidity easing cycle to realize returns from the market cap recovery cycle, capturing core targets of industrial trends (case in point: buying MKR at $200 in 2020 and selling at $6,000 in 2021);
• Liquidity Arbitrage: In continuous market conditions, fully circulating tokens often exhibit linear changes under the liquidity support of different CEXs. At emotional lows, there are often mispricing opportunities in market cap ranges that can be used for liquidity and emotional arbitrage. At this moment, we believe there are significant mispricing opportunities for ETH, enjoying liquidity from the dollar system similar to Bitcoin.

2. DEX Strategy

• Early Sniping:
  • $5 million to $20 million Market Cap: Focus on team background, Github code/product quality, and signals of chip absorption/distribution;
  • $20 million to $50 million Market Cap: Expectations for CEX listings (e.g., a DeFi project surged 300% on DEX after being included on Binance's watchlist);
• Community Empowerment: Observe the consensus building of meme coins; for example, in the AI Agent track, the token's SocialFi index (frequency of mentions on social platforms/circulating market cap) shows that for every 1 unit increase, there corresponds a 47.8% excess return (LunarCrush data), capturing the key turning point from PvP to PvE.

Conclusion

In the twilight of the Qinghai photovoltaic base, a new generation of bifacial modules is storing energy 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 gravel.

The cyclical gears of the crypto market never stop turning. Those projects that sharpen their tools in the cold winter will eventually reflect the brightest light at the dawn of liquidity. What we need to do is simply calibrate our compass like seasoned miners when others abandon their pits and stock up on ammunition before the industry awakens. Only by combining the patience of coal miners, the ruthlessness of gamblers, and the computational power of accountants can we dig out real gold from the ruins. Remember: the bull market is the stage for realizing profits, while the bear market is the battlefield for collecting chips—and now is the golden moment to pick up the basket and bend down to collect the ore, firmly optimistic about the current ETHBTC exchange rate for trading opportunities and the golden opportunity for altcoin accumulation in the coming year.

(Risk Warning: The subjects mentioned in this article all carry a risk of going to zero; investment should be approached with caution. It is advisable to hold a shovel, but not to stake all your provisions.)

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