Analysis of the Current Situation in the Crypto Market: The Dilemma of Insufficient Liquidity and High Valuations

Recently, the crypto market has shown some new characteristics that are worth our in-depth discussion. Looking back at the previous bull markets, whether in the A-shares or cryptocurrencies, they followed a similar speculation logic: from core assets to thematic stocks, and finally to more speculative sectors. However, the current market has exhibited some unusual phenomena.

Lack of Liquidity Becomes a Major Issue

In this round of market conditions, many investors feel that the capital efficiency is insufficient, and their preferred sectors are prone to significant corrections, with value coins performing below expectations. The root of this phenomenon lies in the lack of market Liquidity. Although the launch of the Bitcoin ETF has injected strong momentum into BTC, this Liquidity seems difficult to transmit to other sectors. Even if the Federal Reserve lowers interest rates in the future, it cannot guarantee that funds will immediately flow into the crypto market.

In this situation, the market is exhibiting an extreme state: core assets are rising, while the market value of other coins is stagnant or even declining, and short-term speculative sentiment is driving a temporary increase in MEME coins. This situation reflects the structural problems of current market liquidity, where the funds brought in by ETFs mainly flow into BTC and ETH, and cannot be transmitted layer by layer as usual.

Primary market faces challenges

The funding shortage in the secondary market has also negatively impacted the primary market. A large number of investors have shifted from the secondary market to the primary market in search of opportunities, but they overlook that without a secondary market to take over, the significance of the primary market is greatly diminished. For ordinary investors, it has become exceptionally difficult to profit in the primary market, facing strong competition from professional teams.

In addition, the launch of several highly valued projects has further compressed market liquidity. From the performance of several new coins on their listing day, the opening prices are generally lower than expected, reflecting market doubts about the value of these projects.

High FDV ( Fully Diluted Valuation ) Raises Concerns

According to a report from a research institution, the FDV of tokens issued in the first 5 months of this year is close to the total for the entire last year. If the current price is to be maintained, the market needs approximately $80 billion in additional liquidity. While this high FDV and low circulation model can push up coin prices in the short term, it may be detrimental to the healthy development of the market in the long run.

The impact of high FDV varies among different market participants. It may be favorable for project teams and venture capitalists, but for retail investors, it could lead to a reluctance to take on high FDV tokens. This further exacerbates market differentiation, creating a peculiar situation of "mutual non-acceptance."

Conclusion

The core issues currently facing the crypto market are insufficient funds and high valuations with low liquidity. This not only affects the performance of the secondary market but also transmits to the primary market. Coupled with the complexity of the primary market itself, this further weakens the overall profit effect.

To achieve a true bull market, the market needs to gradually address these issues. We cannot accurately predict the market direction, but rationally analyzing the current problems may provide some insights for future investment decisions.