Guide to Investing in Altcoins: From "Mining Disaster Ruins" to "Golden Veins"
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Guide to Investing in Altcoins: From "Mining Disaster Ruins" to "Golden Veins"
There's nothing new under the sun; the first principle of investing will always be liquidity and cheapness.
Navigating Web3 tides with focused insightsAuthor: Metrics Ventures
In the deep winter of 2018, I was inspecting a photovoltaic power station in the Gobi Desert of Qinghai. In sub-zero 20-degree winds, the chief engineer pointed at vast arrays of idle solar panels and said, "These are relics from the last expansion cycle. Only after market clearance is complete will new technology emerge." Gazing now at Binance's altcoin rankings, those long-stagnant price charts bear an uncanny resemblance to the rows of dormant solar panels from back then.
The crypto market is undergoing a cyclical recurrence no different from traditional industries. Just like the solar industry elimination race between 2012–2016, the CEX altcoin market has entered a brutal clearing phase: numerous star projects from 2021 now see daily trading volumes below $10 million, with median FDVs down over 70% from peaks—mirroring the path once taken by solar, internet, and coal giants as they fell from hundred-dollar stocks to penny stocks.
Yet behind the harshness of cyclical laws always lies a gift. As LONGi Green Energy bet on monocrystalline silicon technology at the industry’s lowest point, so too does the current darkest hour for altcoins nurture breakthrough momentum:
1. Valuation Logic Rebuilt: VC “Paper Wealth” and Leverage Collapse
At the peak of the 2021 bull market, first-tier VCs acted like coal hoarders during a boom:
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Valuation Bubble: Median valuations by risk capital (VC) for seed-stage projects reached $82 million (Messari 2022 Annual Report), 16.4x higher than in 2017 (when similar projects averaged just $5 million). This meant tokens were already priced for 10x gains before even listing on CEXs;
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Leverage Blowup: Institutions like Genesis offered 100% LTV BTC-backed loans in the prior cycle, fueling arbitrage loops: institutions pledge BTC → receive stablecoins → allocate to high-beta tokens. Whales could effectively buy altcoins with leveraged BTC, creating artificial prosperity. But when Genesis collapsed in 2022, collateral values breached liquidation thresholds, triggering chain-wide cascading liquidations. This severed the “funding artery,” turning the altcoin market into a slaughterhouse where primary markets dumped junk assets.
2. Clearance Underway: Crypto Clears Faster Than Real Economy
After two years of shakeout, observable market signals include:
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Market Sentiment Bottoming: Average CEX altcoin market caps have dropped close to 2020 levels; multiple projects launched between 2022–2024 have seen market cap declines exceeding 80%. Retail exit rates hit historical highs, with retail holder address activity over 90 days falling to 12.3% (Santiment), near all-time lows. The CEX Altcoin Fear & Greed Index stayed below 20 for 15 consecutive weeks—the coldest since March 2020;
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New Tracks Emerging: Despite shrinking traditional market makers, new mechanisms such as parent-child coins and on-chain DEX liquidity pools are rebuilding leverage flywheels. AI + Crypto and compliance + Crypto are attempting to generate fresh industrial momentum.
Conclusion: Today’s altcoin market resembles coal stocks around 2015—rapid capacity clearance, fast-declining market热度, inability of news (positive or negative) to move the sector, and facing capital diversion toward alternative segments (like DEXs) across the board. But there’s nothing new under the sun. Investment’s first principle remains liquidity and cheapness. Hidden within the rubble are mispriced gold mines. We believe quality projects will shine through once industry cleansing completes.
Altcoin Capital Warfare: CEX Valuations Enter Volatile Floor-Seeking Phase, Dawn of the DEX New Frontier
1. CEX Dilemma: VC Poison Pill Remains, Clearance in Second Half
CEX-listed altcoins are essentially forced buyers absorbing first-market valuation bubbles:
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Pricing Power Struggle: Projects funded by VCs at $100 million valuations in 2021 now trade at only $10 million in secondary markets—leaving a $90 million “valuation gap” (example: one project had a $200 million seed round valuation but only $40 million circulating market cap upon Binance listing);
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Frozen Capital Lakes: BTC ETFs brought $17 billion in incremental funds, but tighter risk controls prevent market makers from leveraging via BTC collateral as before. Capital gets stuck in new venues, leaving CEX altcoins as “dried riverbeds” caught in a negative feedback loop of losses.
2. DEX Breakthrough: Revolution in Secondary Pricing Power
Decentralized exchanges are rewriting the rules:
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Traditional Path: VC pricing → exchange listing → retail absorbs supply
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Valuation Inversion: On DEXs, retail can buy fully diluted tokens at 1/10th the VC price
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Valuation Reconstruction Mechanism: DEX markets use AMM algorithms for price discovery. Typical projects show 73.5% lower premium rates compared to CEXs (Dune Analytics). DEXs siphoning CEX liquidity are birthing a new asset pricing paradigm: community consensus → DEX liquidity proof → CEX passive listing
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Consensus Fission: When niche ideas (e.g., AI Agents) evolve into broad consensus via grassroots spread, token flow upgrades from “whale vs retail” (PvP) to “newcomer influx” (PvE). Case studies:
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Virtual: Blew up from a DEX niche to being watched by Grayscale, market cap up 20x in three months;
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AI16Z: Community mimics a16z investment logic to package projects, attracting traditional tech investors.
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Core Logic: CEX is like “state-owned enterprises unloading burdens,” while DEX is “private firms reverse IPOs”—the former waits for policy bailouts, the latter thrives on mass movements.
CEX vs DEX: Two Survival Rules, Two Wealth Codes
1. CEX Strategy
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Cigar Butt Hunting: Buy only projects with $50–200 million market cap, real products and communities, and teams holding core pricing power. Avoid “penny stocks” (daily volume < $1 million);
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Wait for Industry Cycle: Following coal stock history, position in 2025–2026. Ride loose liquidity cycles to realize value reversion and capture core trend plays (case: buying MKR at $200 in 2020, selling at $6,000 in 2021);
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Liquidity Arbitrage: In sustained market moves, fully diluted tokens supported across CEXs often show linear behavior. At sentiment bottoms, mispricing across market cap tiers creates opportunities for liquidity and sentiment-based arbitrage. Right now, we believe ETH presents significant mispricing博弈 opportunities under the same USD-system liquidity enjoyed by Bitcoin.
2. DEX Strategy
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Early Sniping:
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$50–200 million market cap: Focus on team background, GitHub code/product quality, accumulation/distribution signals;
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$200–500 million market cap: Anticipate CEX listings (e.g., a DeFi project saw its DEX price surge 300% after Binance added it to watchlist);
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Community Empowerment: Monitor meme coin consensus building. In the AI Agent space, every 1-unit increase in Token SocialFi Index (social mentions / circulating market cap) correlates with 47.8% excess returns (LunarCrush data), helping identify the critical PvP-to-PvE shift;
Conclusion
At dusk in Qinghai’s solar base, next-generation bifacial modules quietly charge beneath the setting sun. The altcoin market is a giant gold mine, yet most enter dreaming of riches and leave clutching gravel.
The gears of crypto’s cycle never stop turning. Projects that hone their tools in winter will ultimately reflect the brightest light when liquidity dawn breaks. What we must do is act like seasoned miners—calibrating our compass when others abandon the pit, stocking up ammunition before the industry awakens. Only by combining the miner’s patience, the gambler’s ruthlessness, and the accountant’s precision can we unearth real gold from the ruins. Remember: bull markets are stages to cash out profits, bear markets are battlefields to accumulate chips—and right now, this is the golden moment to shoulder your basket and start mining. We remain firmly bullish on ETHBTC exchange rate trading opportunities and the golden window for altcoin accumulation over the next year.
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