For this bull market, it is different from previous bull markets in terms of capital volume, market consensus, and number of market participants. So how should we adjust our investment strategy? This article is sourced from the tweet of the crypto KOL Ruyue Xiaochu and compiled by BlockBeats.
Summary:
In this upcoming bull market, there are three major differences compared to previous bull markets. Based on these differences, we need to adjust our trading strategy accordingly.
1) Different capital volume: The total market capitalization of cryptocurrencies is now 2 trillion, and the price of BTC is 50,000 USD. In 2020, BTC was only 10,000 USD.
2) Different consensus on the bull market: Before the previous bull market, there were reports of cryptocurrencies going to zero in 2018, 2019, and early 2020. Many people actually left the industry. However, in this cycle, even in the year of a major decline in 2022, most people still believe that the next bull market will come.
3) Different number of market participants: The number of participants in the market is different.
These three differences are obvious and can be used to deduce the differences in this bull market.
Increased market professionalism, increased secondary institutional players
With the increase in capital volume in the secondary market, the professionalism of the market will definitely increase significantly. Specialized secondary fund institutions have emerged. The simplest reason is that when you have 100,000 USD, you can do your own research. When your capital reaches 10 million USD, you will need a professional research team to operate.
In addition, there are funds specifically established to focus on the secondary market. Overall, these funds have professional teams, strong capital, and abundant resources. As an ordinary investor, it is difficult to compete with them. In the past two years, it has become more difficult to predict the trend of BTC because of the increase in powerful institutions and the competition among them.
So what should we do as ordinary investors?
1) The accuracy of existing skills will decrease, which is a natural result of increased market professionalism.
2) Consider entering the core circles of professional institutions through relationships and networking.
3) If you cannot find an institution, form a group with capable individuals to conduct joint research.
4) In trading, you can take advantage of the disadvantages of professional institutions. For example, the decision-making speed of institutions is slower than individuals, which leads to a slower response to new projects and hotspots. The investment targets of institutions are limited because they have a mainstream investment logic. Some investment sectors do not conform to their trading logic. The most obvious example is “mingwen” (a term referring to Chinese poems inscribed on ancient bronze vessels). In the future, there may be greater opportunities for similar “mingwen” races.
Dig deeper into specific projects or ecosystems
Assuming that a project needs a certain amount of capital to reach a certain market value (such as a circulating market value of 1 billion USD), this bull market has increased the capital volume by tens of times, which means that opportunities have also increased by tens of times.
Of course, the actual situation may not be as ideal, as some projects with high initial market value need to be excluded. However, compared to the previous bull market, there are still many more opportunities. This means that in this bull market, a good project or public chain with a few institutions and some community users who believe in it can achieve a high market value.
It also means that a project does not need many people to believe in it, and even in the case of skepticism, there will be no problem as long as a small proportion of institutions, large investors, and retail investors in the market recognize it. Taking this market trend as an example, “mingwen” may experience the largest increase, followed by the Sol ecosystem. However, apart from the general market, many coins have performed well, and many coins are not even heard of. Not to mention that some new projects have made a group of people wealthy, such as Pixel and Dym.
But don’t be too happy too soon. Although there are more opportunities, there are also more institutions and professional teams. Therefore, you should still be cautious and follow the trend or follow the hotspots. In that case, you may only get the leftovers from them, and sometimes you may not even get anything.
Therefore, the method to maximize profits is to focus on deep cultivation of good projects. Due to the large capital volume in the market, good projects will still have good returns in the future. However, it is important to ensure that you are on board in advance.
Significant valuation premium, few undervalued projects
In this bull market, it is already evident that many listed projects have very high market values. This is a natural manifestation of the abundant capital in the market. However, what many people have not realized is that there are very few undervalued projects in the market.
The reason is simple: there is abundant money and many people in the market. Some professional teams can discover undervalued projects based on market capitalization. But it is very difficult for ordinary people to find them. Therefore, instead of spending time looking for undervalued projects, it is better to study the bottom of market trend cycles.
Every periodic adjustment in the market will cause a decline in coin prices, and basically no one can escape from it. Moreover, prices are often mistakenly killed during panics. Therefore, focusing on studying the bottom of market trend cycles will enable you to buy at attractive prices.
Taking advantage of information asymmetry is also a method, especially when the market is flush with funds, it takes a certain amount of time for new projects on the chain to be discovered.
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