Crypto Market Outlook: The Fusion of AI and Encryption May Become the Next Opportunity

This weekend I have more time to think, and I want to share some thoughts on the market.

The overall trend of the crypto market may not become clear until after September. Considering the macroeconomic headwinds, summer liquidity constraints, and quarterly position adjustments, the true market dynamics will only emerge when participants return after the August holidays. The recent rise in most altcoins is primarily due to short squeezes. Traders have been influenced by the previous rebound to chase prices, but there is a lack of long-term holders. Many tokens that have surged sharply have subsequently experienced similarly severe pullbacks.

Ethereum unexpectedly rebounded, with AI and certain tokens that were previously underperforming leading the charge. Tokens with strong utility, good fundamentals, or buyback mechanisms demonstrated greater resilience, experiencing smaller declines and recovering more quickly. From this, we can draw the following observations:

1. The demand for Bitcoin is real and persistent.

Traditional capital is gradually entering through regulated channels such as ETFs. The nature of the capital supporting BTC is completely different from previous cycles, making large-scale BTC liquidation unlikely to occur unless influenced by macro events.

2. The differentiation of altcoins intensifies

Funds will eventually flow back to altcoins, but will be more selective. Only tokens with clear use cases and practical applications can attract capital. This is why Ethereum may outperform other public chains. Clear regulations, increased DeFi usage, deflationary structures, and staking demand have created a strong positive feedback loop.

3. Some tokens face structural risks

Token unlocks will continue to put pressure on prices. Under insufficient liquidity, the ongoing selling pressure from validators and early investors limits the upside potential. Tokens from certain ecosystems, in particular, face persistent selling pressure due to their validator reward structure.

4. Specific tokens have structural advantages

Some tokens have structural advantages, risk-free investment unlock, fair distribution, and are entirely based on attention. This is a purely speculative mechanism that is very effective in early cycles.

But this stage may be coming to an end. Certain token generation events and the launch of popular tokens mark the peak of attention. After that, interest began to wane. Even during the rebound in April, the performance of certain public chains was not as good as Ethereum.

Some tokens may still perform well, especially those that have gained popularity outside the crypto market. These may still provide asymmetric returns. However, the era of simple imitation has ended. Only tokens with strong narratives and market recognition possess true speculative value.

5. The next market trend

If certain tokens are no longer the opportunity, then what is the next hotspot?

My view is: the combination of AI and encryption.

Similar to the DeFi summer, most early AI projects fail after the hype. However, projects that are truly based on practicality are quietly building during the bear market. We have already seen some projects emerging on-chain.

As the popularity of certain tokens fades, attention will naturally shift to new narratives. AI, with its clear practicality, is well-suited to become the next focus.

Many AI x Crypto projects adopt a fair issuance model, echoing the narrative of previous successful cases.

This is why I have recently spent time researching and laying out plans in this field. There is no need to rush into building a position now, but I believe that if the market rebounds strongly again, this field will hold the greatest asymmetric opportunities.