Why is this cycle so difficult, and what should I do?

Author: Aylo

Compiled by: Shenchao TechFlow

First of all, this cycle is indeed very tough; don’t let anyone pretend to tell you it isn’t.

But the reality is that each cycle is harder than the last. You are competing with a larger pool of participants, and more and more participants are becoming more sophisticated, leading to more ultimate failures.

If you don’t have most of your holdings in BTC or SOL during a bear market, you probably haven’t made money and might even be tearing your hair out.

I would struggle too if I didn’t price in SOL. Yes, we do have some big individual winners, but I guess if you are heavily speculating on these assets, you might end up giving back a portion, or even a large portion, of your gains. Especially since people don’t just walk away after a big win.

They will say, "There’s still time in the cycle," and then think it can keep going up, which is how they give back their profits. The truth of "play stupid games, win stupid prizes" never goes out of style. Sometimes, this situation just plays out over a longer time frame for traders and gamblers.

So, why is this cycle so tough?

PTSD (Post-Traumatic Stress Disorder)

We have two examples showing that most tokens in large altcoin cycles have dropped by 90-95%. Coupled with the collapses of Luna and FTX, this has led to a chain reaction throughout the industry, causing asset prices to potentially drop lower than they should.

Many big players have been swept out, and we haven’t seen the return of cryptocurrency lending platforms in this cycle. This PTSD has deeply affected crypto natives. Especially in the way the altcoin market trades, primarily because the belief that "everything is a scam" has become the mainstream view of this cycle.

In the previous two cycles, the belief that "this technology is the future" was more prevalent, but now it has become a minority view or is on par with "everything is a scam." No one wants to hold anything long-term because they simply don’t want to lose most of their portfolio again.

This has created a "maximum jeet cycle." This sentiment is also amplified on Crypto Twitter, as participants constantly look for the top of the cycle.

This psychological impact is not limited to trading behavior—it has also affected the entire ecosystem's attitude towards building and investing. Projects now face higher scrutiny standards, and the threshold for trust has increased exponentially. This has both positive and negative sides: while it helps filter out obvious scams, it also makes it harder for legitimate projects to gain attention.

Innovation

While innovation continues and infrastructure improves, there are no longer jaw-dropping 0 to 1 breakthroughs like DeFi.

This makes arguments like "cryptocurrency has made no progress" easier to accept and leads to more narratives of "cryptocurrency has achieved nothing."

The landscape of innovation has shifted from revolutionary breakthroughs to incremental improvements. While this is a natural evolution of any technology, it poses challenges for a narrative-driven market.

We still lack breakthrough applications that are necessary to bring cryptocurrency to hundreds of millions of on-chain users.

Regulation

The corrupt U.S. Securities and Exchange Commission (SEC) has caused chaos. They have hindered the progress of the industry and prevented certain areas (like DeFi) that could achieve product-market fit (PMF) with a broader audience from developing further.

They have also prevented all governance tokens from passing any value to holders, thus creating the narrative that "all these tokens are useless," which is somewhat true. The SEC has driven away developers (see Andre Cronje's description of how the SEC made him step back), blocked traditional finance (TradFi) from interacting with the industry, and ultimately forced the industry to seek funding from venture capital firms. This has led to poor supply and price discovery dynamics, with value captured by a few.

However, we are now seeing some positive changes, such as Echo, Legion, and more public sales.

Financial Nihilism

All of the above factors have led to financial nihilism becoming a significant factor in this cycle.

The "useless governance tokens" and high FDV (Fully Diluted Valuation) caused by the SEC, along with low circulation dynamics, have pushed many crypto natives towards memecoins in search of "fairer" opportunities. Indeed, in today's society, due to soaring asset prices and wages not keeping up with the relentless devaluation of fiat currency, young people have to gamble to elevate their status, making memecoin lotteries very appealing. The allure of the lottery lies in the hope it provides.

As gambling has product-market fit (PMF) in cryptocurrency, and we have better technology for gambling (like Solana and Pump.fun), the number of tokens issued has surged. This is because many people want ultra-high-risk gambling, and where there is demand, there is supply.

"The trenches" have always been a part of cryptocurrency, but in this cycle, it has become a widely recognized term. This nihilistic attitude manifests in various ways:

• The rise of "Degen" culture becoming mainstream

• Shortened investment time horizons

• Greater focus on short-term trading rather than long-term investing

• Normalization of extreme leverage and risk-taking

• A "who cares" attitude towards fundamental analysis

Experiences from Previous Cycles Have Become Obstacles

The past few cycles have taught people that they can buy some altcoins during a bear market and eventually get returns by outperforming BTC.

Very few people are good traders, so in the past, this was the best path for most. Overall, even the worst altcoins had a chance.

But this cycle is a trader's market, more suited for sellers than holders. Traders have even gained the largest profits of this cycle through HYPE airdrops. The narratives of this cycle have not lasted long, and compelling narratives are few. The market has more sophisticated participants who are better at efficiently extracting value, so mini altcoin bubbles are not particularly large.

The first hype cycle of AI agents is an example. This might be the first time people feel "this is the new thing we’ve been looking for." But this is still in the early stages, and long-term winners may not have emerged yet.

Bitcoin Has New Buyers, While Altcoins Mostly Do Not

The differentiation between Bitcoin and other assets has never been more apparent. Bitcoin has unlocked the demand of traditional finance. It now has an incredible new source of passive demand, and central banks are even discussing adding it to their balance sheets.

Altcoins, on the other hand, find it harder than ever to compete with Bitcoin, which makes sense because Bitcoin has a very clear target—the market cap of gold.

Altcoins really have no new buyers. Some retail investors returned when Bitcoin hit new highs (but they bought XRP 💀), but overall, there is insufficient new retail capital inflow, and cryptocurrency still has a poor reputation.

The Changing Role of Ethereum

The decline of Bitcoin's dominance is largely due to the growth of Ethereum's market cap. Many people see Ethereum's rise as the trigger for "altcoin season," but this heuristic has not worked in this cycle, as Ethereum has underperformed due to fundamental reasons.

Many traders and investors find it hard to accept that Ethereum has failed to drive higher risk appetite; in fact, it has continued to play the role of ending mini altcoin seasons, which is contrary to past situations.

Despite evidence that certain narratives and sectors can run without Ethereum doing anything, many traders still believe that Ethereum needs to rise for a true altcoin season to occur.

What Should I Do?

So, what should you do from here?

Work hard, or work smarter. I still believe that fundamentals will always matter in the long run, but you must truly understand the projects you support and how they can actually outperform Bitcoin. Currently, only a few candidates meet this criterion.

Look for projects with the following characteristics:

• Clear revenue models

• Actual product-market fit

• Sustainable token economics

• Strong narratives that complement the fundamentals (I think AI and RWA fit this)

I believe that due to the unlocking of U.S. regulation, those projects with stronger fundamentals and product-market fit (PMF) will finally be able to achieve value accumulation for their tokens, making them lower-risk options. Protocols that can generate revenue are now ready to perform well. This marks a significant shift away from the "greater fool theory" that dominated many previous token models.

If your strategy is to "wait for retail to come in and then sell," then I think you will run into a lot of trouble. The market has moved beyond cycles driven purely by retail; sophisticated participants are likely to get ahead of this obvious strategy.

You can choose to become a better trader, try to cultivate your edge, and focus on doing more short-term trades, as this market indeed offers many consistent short-term opportunities. On-chain trading may yield greater multiples, but it can also be more ruthless when it goes down.

For most without a clear edge, a "barbell portfolio" remains the best choice. Allocate 70-80% of your funds to BTC and SOL, and then leave a smaller portion for more speculative investments. Regularly rebalance to maintain these proportions.

You need to understand how much time you can dedicate to cryptocurrency and adjust your strategy accordingly.

If you are an ordinary person with a regular job, competing with those young people who sit there for 16 hours a day is not feasible. Passive holding of underperforming altcoins and waiting for your turn is no longer a viable strategy in this cycle.

Another strategy is to try to combine different fields. Build a portfolio based on solid assets, then look for opportunities like airdrop mining (which is harder now but still has low-risk opportunities), or identify some emerging new ecosystems to position yourself early (like HyperLiquid, Movement, Berachain, etc.), or focus on a specific sector.

I still believe the altcoin market will grow this year. The conditions are in place, and we are still related to global liquidity, but those that can significantly outperform BTC and SOL will be limited to a few sectors and fewer altcoins. Faster altcoin rotations will continue to occur.

If we encounter some crazy money printing, we might see situations closer to traditional altcoin seasons, but I think the likelihood of that is lower than we hope. Even in that case, most altcoins will only provide market-average returns. This year, we still have many important altcoins about to launch, and liquidity will continue to be diluted and dispersed.

It’s not easy, but I’ll give you some hope: I have never seen someone who has seriously committed to cryptocurrency for several years fail to make a decent amount of money.

This asset class still has many opportunities and many reasons to be optimistic about its growth.

Ultimately, I don’t know more than anyone else; I’m just adapting to what I see in this cycle.

Additionally, I want to add: we are not in the early stages of the cycle. This is clear. The bull market has lasted a long time, and this fact will not change whether you are making money or not.

"Control the downside risk, and the upside will take care of itself."

This saying will always be the truth.