Is the crypto market no longer rewarding diamond hands?

Author: 1912212.eth, Foresight News

Once upon a time, Zhao Changpeng's saying "If you can't hodl, you won't get rich" was regarded as the golden rule of investment in the crypto world. Buying, holding firmly, and then selling at a profit to gain substantial returns made the HODL philosophy very popular in the community.

Some investment institutions gained significant returns through in-depth research and betting, such as the last cycle where top-tier funds achieved hundreds or even thousands of times returns on MATIC and AAVE. Various legendary wealth stories led retail investors to generally believe in the powerful effect of diamond hands. However, while this investment philosophy was somewhat effective in the last cycle, it is no longer revered by the market in this cycle, especially among players holding a lot of altcoins.

Under a four-year cycle, the market structure has undergone considerable changes. If one cannot adjust their style in a timely manner, they often face the risk of standing guard at the peak. Has the market really stopped rewarding diamond hands?

1. Memes and AI Take Center Stage, General Bull Market No Longer

In past cycles of the crypto market, a general bull market often followed six months after Bitcoin's halving. Market funds would accumulate in Bitcoin, then spread to Ethereum after reaching a certain level, followed by mainstream altcoins, and finally small-cap altcoins and meme coins would go wild, marking the end of a typical bull market cycle.

This cycle, however, saw the first wave of upward momentum brought forward by the favorable Bitcoin spot ETF news. After Bitcoin enjoyed its moment in the spotlight, the crypto market remained quiet for a long time. The long-awaited rise in Q4 2024 turned out to be quite brief.

If you embraced popular assets like Bitcoin, SOL, and Dogecoin early in this cycle, the returns for diamond hands have been quite substantial. But if the altcoins you chose were not favored by the market, such as those in staking, inscriptions, gaming, or NFTs, the returns you might see could be "tragically poor."

Recently, Binance's launch of new coins, often peaking immediately upon listing, has led to a continuous decline. Projects with slightly better quality and popularity might experience a brief period of increase, while those without heat or utility that continue to unlock have seen buying pressure weaken and set new historical lows. If diamond hands unfortunately chose obscure sectors and coins, holding on without selling could lead to significant losses.

Moreover, compared to the relatively hot DeFi and NFT sectors in the last cycle, this cycle has not seen any truly breakout innovations that could compete with them. Market funds have been stagnant for a long time, concentrated in Bitcoin, memes, and AI concept coins.

The chart below clearly shows that Bitcoin's market cap share saw significant declines in both 2017 and 2021, due to the general rise of altcoins. By 2023, Bitcoin's market cap share began to climb steadily, rising from 38% to even over 60% at one point. In contrast, Ethereum has been troubled by multiple factors, with its market cap share starting to decline since the beginning of 2023.

Historically, it is rare for Bitcoin's market cap share to rise without a corresponding general bull market for altcoins.

Now, the market seems to only reward diamond hands holding a very small number of coins like Bitcoin.

2. Mainstream Altcoins Underperform Expectations

The difficulty of the altcoin market in this cycle is incomparable to the last cycle. Taking the last cycle's L1 as an example, based on the lowest point after listing on Binance, DOT achieved a maximum return of over 20 times, NEAR nearly 40 times, AVAX over 40 times, SOL over 250 times, and UNI in the DeFi sector also returned over 20 times. The wealth effect in the industry was very significant.

It is worth mentioning that the aforementioned tokens with substantial returns all fell to their bottom ranges six months to a year after reaching historical highs.

In this cycle's infrastructure L1, aside from SOL/SUI performing decently, the rest have underperformed. In L2, OP recorded a maximum return of 10 times, while ARB reached a maximum of 3 times. Both fell to their bottom ranges within five months after hitting new highs, with ARB even dropping from a historical high of $2.42 to a historical low of $0.34. Stablecoins like USUAL/ENA recorded decent returns, but from their lows, they also fell below 10 times.

Some projects that were highly sought after by VC capital have performed poorly, with EIGEN achieving a maximum return of 2 times, now hitting historical lows. ETHFI and RENZO, which were re-staked, began a downward trend immediately after listing on Binance. IO achieved a maximum return of 2 times but has also reached historical lows.

More and more players are unwilling to take over high-valued VC coins, leading to a discount in market participation for both new and old projects.

Additionally, data from CoinMarketCap and CoinGecko shows that there are currently over 20,000 altcoins (excluding low-market-cap memes), which is 2-3 times more than in 2021. The variety of tokens and the rise of memes inevitably impact the attention given to mainstream altcoins, leading to smaller returns.

3. MEME Market Has Fast Pace and High Intensity

In previous cycles, VC coins that attracted much attention are no longer in demand. After failing to find the elusive wealth effect on CEX, market players have turned to on-chain opportunities.

The trend of chasing meme coins on Solana has swept the industry. It is undeniable that the wealth effect of memes like WIF/BOME/TRUMP once garnered significant market attention, but if you chose to hold on without cashing out, the pullback in profits could be several times.

WIF peaked at around $4.8 after listing on Binance but has now dropped to $0.8. BOME reached a high of $0.029 after listing on Binance, but its current price is $0.002. Although TRUMP brought wealth effects to some on-chain players, if you didn't take profits at the market peak of $70, it plummeted to a low of $16 in just about a week.

MEME may seem fair, but the difficulty is not small. The pace of growth and decline of market targets is accelerating, and participants can easily get severely trapped if they are not careful.

Taking the AI meme GOAT as an example, on October 23, 2024, trader Nachi tweeted, "I got 4% of the total supply of GOAT. This will be the best trade of this cycle," when GOAT was priced around $0.5. On December 12, Nachi still claimed to hold GOAT, which was then priced at $0.84. After that, the situation took a sharp downturn, first being overshadowed by ACT, and then losing heat to AI agents like VIRTUAL, with the price dropping below $0.1, while GOAT's historical high was once $1.37.

Using Moonshot, known for its meme coins, as an example, Foresight News selected tokens launched on the Moonshot platform between November 2024 and January 2025 as research samples. Among 116 launched tokens, only 17 currently have prices higher than their launch prices, a ratio of less than 15%, with the vast majority of projects currently in a downtrend, with over 85% of projects experiencing declines.

The cold, hard data tells market players that finding good targets and achieving high returns at low costs is not easy. MEME dropping over 80% or even going to zero is common.

The fast pace and high intensity of MEME have also spread to parts of the altcoin market that are already precarious in liquidity. Those exchanges with low narrative ceilings, no heat, and high valuations are all facing their "dark moments."

4. What to Do?

From a macro perspective, the market's requirements for diamond hands are becoming increasingly high. First, it is necessary to assess market sentiment and the top profit-taking range; if you hold on without selling incorrectly, all profits may ultimately vanish. Secondly, careful selection of targets is essential; those worthy of being diamond hands must be chosen very cautiously. If you choose the wrong sector or token, even if a bull market returns, it may have nothing to do with you.

Generally, do not be a diamond hand in the meme coin sector.

Cashing out in a timely manner to improve your life is also a good strategy. Reducing positions helps alleviate subsequent holding pressure, and once a significant pullback occurs, realized profits can ensure you still have funds to seize opportunities.