Market Reflection: Analysis of Future Trends in the Encryption Field

Recently, during a leisurely weekend, I had more time to think about market dynamics and would like to share some personal views on the current cryptocurrency market.

In my opinion, the real direction of the crypto market may not become clear until after September. With the market currently hampered by macroeconomic headwinds, a lack of liquidity over the summer, and quarter-end institutional rebalancing, the real market dynamics may emerge as participants return after the August holiday. Looking at recent market activity, it is not difficult to see that most of the altcoins’ rally is actually driven by short squeezes. Traders have been conditioned by past rallies to chase short-term momentum, but this time there is a lack of real long-term holder support. Most investors have already been hit hard by previous market corrections. Unsurprisingly, those fast-climbing tokens then experienced similarly violent pullbacks.

Ethereum’s performance has been surprisingly strong, while the AI coins and meme coins that were previously hit the hardest have led this rebound. In contrast, tokens with actual application scenarios, solid fundamentals, or buyback mechanisms have shown stronger resilience—they were more stable during the downturn and recovered faster. From this, we can summarize a few key insights:

1. The demand for Bitcoin shows authenticity and persistence

Traditional capital is gradually entering the market through ETFs and other compliant channels.

The current nature of funds supporting BTC is fundamentally different from previous cycles. This is also why large-scale BTC liquidations are unlikely to occur unless triggered by significant macro events.

2. The altcoin market will accelerate differentiation.

In the long run, funds will eventually flow back into the altcoin space—but this will not be a comprehensive return. Only tokens with clear functions and real-world use cases can attract capital inflow. This is precisely why I believe Ethereum will perform better than Solana. Regulatory clarity, the growing usage of DeFi, deflationary mechanisms, and staking demand together create a strong positive cycle. Moreover, since ETH has long failed to meet market expectations, there are still potential buyers waiting on the sidelines for the right moment to enter.

3. Tokens backed by venture capital face structural risks

The token unlocking plan will continue to put pressure on prices. In an environment with insufficient liquidity, the ongoing selling pressure from validators and early investors will limit the upward potential. This is also why I believe that high-valuation tokens listed on centralized exchanges have a bleak future. Especially tokens in the Cosmos ecosystem face ongoing selling pressure due to their validator reward structure design.

4. The Structural Advantages and Cycles of Meme Coins

Meme coins have structural advantages: no VC unlock pressure, fair distribution, completely driven by attention. This is a pure market speculation mechanism—as proven in early cycles, this model does indeed work.

However, I believe this phase is coming to an end.

The token generation event of Pump.fun and the launch of Trump coin marked the peak of interest in meme coins. Since then, market interest has begun to wane. Even during the rebound in April, SOL’s performance was inferior to ETH—if everyone already holds SOL, who will become the new marginal buyer when the momentum of meme coins fades?

Some meme coins may still perform well, especially those that have gone viral through influencers on mainstream social platforms like TikTok or Instagram. These may still bring asymmetric returns. However, the era of relying solely on “cute animal images” for excess returns is over. Only those projects with strong narratives and clear market recognition—projects that people can collectively identify with—hold real speculative value.

Ironically, the market’s fatigue towards venture-backed tokens has created opportunities for fairly launched Web2/3 projects, which will become the source of the next wave of wealth generation.

To seize these opportunities, active participation in on-chain activities is required. When information asymmetry exists, big opportunities naturally emerge. Once the information is widely known, the return rate will decrease.

This is also why I pay more attention to on-chain market dynamics. Successful cases often trigger a capital rush towards similar narratives, and the focus ultimately directs capital flow.

5. The Next Focus of the Market

If meme coins are no longer the main opportunity, then where is the next hotspot?

My point of view is: the integration of AI and encryption technology.

For this cycle, after the early layout, my operational focus is mainly on meme coins and AI-related projects.

Just like the DeFi summer, most early AI projects fade into silence after a brief hype. But truly practical projects are quietly building during the bear market. We have seen some projects start to stand out on the chain.

As the profit margins for meme coins decrease, market attention will naturally shift to new narratives. AI, with its clear practical value, is likely to become the next investment hotspot.

Many AI and encryption combined projects adopt a fair launch mechanism, echoing the path of successful cases.

This is also why I have been researching and laying out in advance in this field during the relatively calm weeks in the market. There is no need to rush to establish a full position right now—however, I believe that if the market rises strongly again, this field will cultivate the greatest asymmetric investment opportunities.