Altcoin Investment Guide: From "Mining Disaster Ruins" to "Gold Mines"

Author: Metrics Ventures

In the deep winter of 2018, I was inspecting a photovoltaic power station in the Gobi Desert of Qinghai. In the minus 20-degree cold wind, the chief engineer pointed to the rows of idle solar panels and said, "These are the legacy of the last round of expansion; only when the market clears will new technologies break ground." At this moment, gazing at the Binance altcoin rankings, the long-stagnant candlestick patterns surprisingly resembled the solar panel arrays of that year.

The crypto market is undergoing a cyclical recurrence akin to traditional industries. Just like the elimination rounds in the photovoltaic industry from 2012 to 2016, the CEX altcoin market has entered a brutal clearing phase: the daily trading volume of many star projects from 2021 has fallen below ten million dollars, with the median FDV evaporating over 70% from its peak. This mirrors the trajectory of photovoltaic, internet, and coal giants falling from hundred-dollar stocks to penny stocks.

However, the cruel side of cyclical laws always hides great gifts. Just as LONGi Green Energy bet on monocrystalline silicon technology at the industry's low point, the current darkest moment in the altcoin market is nurturing the momentum for breakthroughs:

1. Valuation Logic Reconstruction: VC's "Paper Wealth" and Leverage Strangulation

At the peak of the 2021 bull market, primary market VCs were like speculative merchants hoarding coal:

• Valuation Bubble: The median valuation of seed-stage projects by venture capital (VC) reached $82 million (Messari 2022 Annual Report), expanding 16.4 times compared to the 2017 cycle (where similar projects were only $5 million), leading to tokens being over-leveraged by ten times when they went live on CEX;
• Leverage Blowup: Institutions like Genesis provided 100% LTV BTC collateral loans in the last cycle, creating an arbitrage loop: institutions collateralize BTC → obtain stablecoins → allocate to high-β tokens. Traders could collateralize BTC to buy altcoins, creating a false prosperity. But with Genesis's blowup in 2022, the value of collateral fell below the liquidation line, triggering a chain liquidation, and this "funding lifeline" was severed, turning the altcoin market into a slaughterhouse for the primary market's dumped junk stocks.

2. Clearing in Progress: The Crypto Industry's Clearing Cycle is Always Faster than Real Industries

After two years of reshuffling, the market signals we can observe are:

• Market Sentiment at Bottom: The average market cap of CEX altcoins has nearly dropped to 2020 levels, with multiple projects listed between 2022-2024 seeing their market cap shrink by over 80%; the retail exit rate has reached a historical peak, with the 90-day activity of retail holding addresses dropping to 12.3% (Santiment), nearing historical lows; the CEX altcoin fear and greed index has remained below 20 for 15 weeks, reaching its lowest point since March 2020.
• New Tracks Emerging: Despite traditional market makers retracting, new mechanisms like parent-child coins and on-chain DEX pools locking liquidity are rebuilding leverage flywheel channels, with AI and Crypto, compliance and Crypto attempting to nurture new industrial momentum.

Conclusion: The current altcoin market resembles coal stocks around 2015—capacity clearing is progressing rapidly, market enthusiasm is declining swiftly, and both negative and positive news can no longer trigger industrial fluctuations, while it also faces the siphoning of liquidity from alternative sectors (DEX). However, there is nothing new under the sun; the first principles of investing are always liquidity and value. Hidden within the ruins are mispriced gold mines, and we believe that quality projects are just waiting to shine through the industry's clearing.

Altcoin Capital Struggles: CEX Valuation Enters a Volatile Bottom-Seeking Phase, DEX New Frontier's Dawn

1. CEX Predicament: VC Poison Pill Unresolved, Clearing Enters the Second Half

CEX altcoins are essentially the "buyers" of the primary market valuation bubble:

• Pricing Power Struggle: Projects that VCs invested in at a $1 billion valuation in 2021 are now only recognized at a $100 million market cap in the secondary market, with the $900 million gap becoming a "valuation gap" (Example: a project with a seed round valuation of $200 million had a circulating market cap of only $40 million after listing on Binance);
• Capital Bottleneck: The BTC ETF brought in $17 billion in incremental funds, but due to tightened risk controls, market makers can no longer leverage BTC as they did in the past, causing funds to be trapped in new trading venues, and CEX altcoins have become "dry riverbeds," entering a negative feedback loop of losing money.

2. DEX Breakthrough: Secondary Pricing Power Revolution

Decentralized exchanges are rewriting the rules of the game:

• Traditional Pathway: VC Pricing → Exchange Listing → Retail Takeover
• Valuation Inversion: On DEX, retail investors can buy fully circulating tokens at 1/10th the price of VCs.
• Valuation Reconstruction Mechanism: The DEX market achieves price discovery through AMM algorithms, with typical projects listing at a premium rate 73.5% lower than CEX (Dune Analytics); DEX siphoning liquidity from CEX is creating a new paradigm for asset pricing: community consensus → DEX liquidity proof → CEX passive listings.
• Consensus Fission: When niche concepts (like AI Agents) transform into mainstream consensus through community dissemination, the flow of chips upgrades from "trader vs. trader" (PvP) to "incremental inflow" (PvE). Typical cases:
• Virtual: From a small DEX circle to being listed on Grayscale's watchlist, with a market cap increase of 20 times in three months;
• AI16Z: The community mimics a16z's investment logic to package projects, attracting traditional tech funds to enter.

Core Logic: CEX is "state-owned enterprises offloading burdens," while DEX is "private enterprises going public through shell companies"—the former waits for policy bailouts, while the latter relies on grassroots movements.

CEX vs DEX: Two Sets of Survival Rules, Two Types of Wealth Codes

1. CEX Strategy

• Picking Up Cigarette Butt Stocks: Only buy projects with a market cap of $5 million to $20 million, real products and communities, and where the project party holds core pricing power, avoiding "penny stocks" (daily trading volume < $1 million);
• Waiting for the Industrial Cycle: Referencing the history of coal stocks, layout for 2025-2026, waiting for the liquidity easing cycle to realize returns from the market cap recovery cycle, capturing core targets of industrial trends (Example: buying MKR at $200 in 2020 and selling at $6,000 in 2021);
• Liquidity Arbitrage: In continuous market conditions, fully circulating tokens often exhibit linear changes under liquidity support from different CEXs, and there are often mispricing opportunities in market cap ranges at emotional lows, which can be used for liquidity and sentiment arbitrage. At this moment, we believe there is a significant mispricing opportunity for ETH, enjoying liquidity from the dollar system similar to Bitcoin.

2. DEX Strategy

• Early Sniping:
• Market Cap $5-20 million: Focus on team background, Github code/product quality, and signals of chip absorption/distribution;
• Market Cap $20-50 million: Expectations for CEX listings (e.g., a DeFi project surged 300% on DEX after being included on Binance's watchlist);
• Community Empowerment: Observe the consensus building of meme coins; for example, in the AI Agent track, the token's SocialFi index (social platform mentions/market cap) increases by 1 unit, corresponding to 47.8% excess returns (LunarCrush data), capturing the key turning point from PvP to PvE.

Conclusion

In the twilight of the Qinghai photovoltaic base, a new generation of bifacial modules is storing energy in the sunset glow. The altcoin market is a giant gold mine, but most people come in with dreams of striking it rich and leave with gravel.

The cyclical gears of the crypto market never stop turning; those projects honing their tools in the cold winter will eventually reflect the brightest light at the dawn of liquidity. All we need to do is, like seasoned miners—calibrate our compass when others abandon their pits and stock up on ammunition before the industry awakens. Only by combining the patience of coal miners, the ruthlessness of gamblers, and the analytical power of accountants can we extract real gold from the ruins. Remember: the bull market is the stage for realizing profits, while the bear market is the battlefield for collecting chips—right now is the golden moment to pick up the basket and lower your head to gather minerals, firmly optimistic about the current ETHBTC exchange rate for trading opportunities and the golden opportunity for altcoin accumulation within the next year.

(Risk Warning: The subjects mentioned in this article all carry the risk of going to zero; investment should be cautious. It is advisable to hold a shovel but not to stake all your provisions.)