The drop in the price of altcoins has been severe. Are there any chances in the future?

Throughout December 2024, adjustment was undoubtedly the main theme of the market. Although the maximum decline of Bitcoin from its highs was only 15%, the decline of many altcoins has been halved, and even the entire gains of some altcoins in this round of bull market have been completely wiped out. According to CoinMarketCap data, in this round of adjustments, the median of the maximum decline of the top 100 currencies by market value was 44%. Such a sharp decline has only occurred in the crashes of May 19 and March 12 in the past five years. Therefore, this adjustment has also caused the market to suffer a heavy blow to altcoins. So, is there still a chance for the altcoin market?

On this issue, the author's point of view is very clear: the altcoin market has not ended.

First of all, from the trading level, the trend of funds flowing to altcoins has been very obvious, mainly manifested in the following two aspects: First, the holdings of altcoins in this round of market have exploded, and the growth rate is far higher than that of Bitcoin. Although the massive liquidation in December caused the size of open contracts to drop by nearly $10 billion, the current size of open contracts is still about 40% higher than the peak of the bull market in March 2024. This reflects that altcoins are still the main direction of capital game; second, although the size of altcoins has exceeded March 2024, and even reached the highest level in nearly three years, the weighted average funding rate peak of altcoins in this round of market is still much lower than that in March 2024. This shows that the bullish sentiment in the market is still in a state of mild fermentation.

Secondly, at the policy level, although Trump’s plan to include Bitcoin in national reserves faces great challenges, the possibility of him seeking benefits for his family and political allies remains high. In the past month, the DeFi protocol founded by the Trump family has purchased a large number of tokens such as ETH, LINK, AAVE, ENA, and ONDO. These investments mainly bet on two major positive factors: First, Trump nominated cryptocurrency supporter Paul S. Atkins as SEC chairman, thereby promoting the lifting of Ethereum ETF pledge restrictions; second, Trump nominated asset tokenization supporter David Sacks as the White House crypto director, responsible for drafting the legal framework for cryptocurrencies and providing legal support for the advancement of asset tokenization.

In addition, during Trump's campaign, Musk and the founder of XRP both provided him with financial and resource support. Therefore, it is generally expected that after Trump's election, DOGE will be expected to become a new approved crypto ETF project, and XRP's legal dispute with the SEC will be resolved soon. In short, as a series of policy benefits gradually land, new trading opportunities in the crypto market will also emerge. ‍‍

In fact, since the market share of Bitcoin peaked and fell from 60%, the daily trading share of altcoins (excluding the top ten in market value) has been maintained at more than 40% for a long time, and has always been in a dominant position. The reason why investors feel that the altcoin market is sluggish is that the daily trading volume has dropped sharply from US$300 billion to US$150 billion, which has led to a situation where there are more people than porridge in the market. In the market conditions of reducing volume, funds mainly break out in two directions: one is to concentrate on currencies with strong trends, such as SUI, AAVE, XRP, etc.; the other is to gather and gamble on popular topics, such as AI Agent, DeSci, RWA, etc.

Since the market bottomed out on December 20, AI Agent has undoubtedly become the hottest topic in the market. The most typical phenomenon is that among the top ten currencies on the CoinMarketCap increase list, almost half are related to AI Agent. AI Agent's two star projects, Ai16z and Virtual, have undoubtedly become one of the most profitable tokens in December 2024. As funds have been deeply involved in this field, the AI ​​Agent market is likely to continue for several months. For investors, in order to gain considerable excess returns, they still need to keep up with market hotspots. However, the author does not think that chasing high Ai16z and Virtual is the best choice for participating in AI Agent at present. On the contrary, the second-tier projects that have been fully adjusted, such as ACT, GOAT, GRASS, etc., are more likely to breed trading opportunities.

In the operation of altcoins, what type of trading opportunities investors pay attention to mainly depends on their personal risk preferences and benefit expectations.

For conservative investors, I personally believe that the platform coins of the head exchanges still have a high safety margin. After all, the current valuation and growth are still very good. At the same time, the leaders in most sub-sectors also provide good opportunities for building positions through pullbacks, such as UNI, LINK, and AAVE in the DeFi sector.

For speculators who are keen on emotional games, AI Agent and RWA are undoubtedly the directions with higher odds. The logic of the former has been analyzed before, and the latter has shown signs of accelerating after Trump's victory. First, the appointment of Sacks, the White House encryption director, has provided strong support for asset tokenization; secondly, institutions such as BlackRock, Franklin Templeton, Tether, and Visa have laid out asset tokenization. As a16z's policy director Brian Quintenz, regulatory director Michele Korver, and general counsel Miles Jennings mentioned in a joint article: Now the channel for constructive engagement with regulators and legislatures has been opened. As the regulatory system becomes clearer, it has become possible for project parties to explore blockchain services and issue coins.