The current crypto market is facing challenges due to low float and high fully diluted valuation (FDV) tokens. These factors have left investors questioning how to navigate this market. Let’s skip the causes for now and focus on the consequences and potential strategies moving forward.
The Low Float and High FDV Dilemma
Previously, the low float model was seen as the ideal way to launch tokens, accepted by both retail investors and VCs (Venture Capitalists):
- VCs/Teams control the majority of the token supply.
- Retail investors expect that with a large amount of tokens locked up, VCs will pump the price before selling. The strategy is to find a suitable entry point before this happens.
This mindset dominated during the 2021-2022 bull market, but recent data shows this model has become ineffective. Many tokens have significantly declined in value since their launch:
- $W - Down 58%
- $DYM - Down 61%
- $MANTA - Down 47%
- And others...
Recent coin launches over the past three months have also underperformed.
Why Is This Cycle Different?
Several factors could explain why this cycle is not following previous trends:
- No Uptrend Yet: The market hasn’t fully entered a bull phase, meaning fresh capital isn't flowing in.
- Altcoin Season Hasn’t Arrived: Altcoin seasons typically fuel the growth of new projects, but we haven't reached that point yet. Additionally, with low overall market capitalization, current FDV levels seem disproportionately high.
- The Rise of Memecoins: Memecoins, many of which have no vesting schedules or VC involvement, have gained significant market share, reaching billion-dollar valuations. This has outperformed many so-called "tech" coins, drawing investor attention away from traditional projects.
Investment Strategies: Tech Coins or Memecoins?
The choice between tech and meme coins depends on your risk tolerance and strategy. Both can be lucrative with the right approach:
1. Memecoins:
Memecoins will likely continue to be a dominant trend in the near future. However, it's important to recognize that memecoin investing is speculative. Consider the following:
- Attention Economy: Memecoins thrive on hype and public attention. To succeed, you need to understand this dynamic and hold during periods of high interest, but also have the discipline to take profits before the hype fades.
2. Tech Coins:
Tech-focused projects pose a different set of challenges, often being dominated by VCs. To succeed in tech coins, consider these two strategies:
- Trade Based on Narrative: Identify strong narratives like AI, gaming, or real-world assets (RWA) that attract significant attention. When these narratives gain traction, FDV becomes less of an issue. However, always take profits at the right time, as each narrative has its own hype cycle.
- Timing the Market: Enter when a narrative is still under the radar. In today’s market, low float can cause sharp price drops, so wait for market consolidation before entering. It’s also worth comparing current prices with pri/seed prices to find a more attractive entry point. This approach worked well for me with Sei and Sui.
3. The Slow and Steady Approach: BTC, ETH, SOL
For those who prefer low-risk, long-term growth, investing in Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) remains a solid strategy. These assets have already proven themselves, and with the potential approval of ETFs, they offer steady, reliable growth, though with lower returns than riskier investments.
Final Thoughts: Sharpen Your Strategy
Whether you choose memecoins or tech coins, the key is to refine your strategy. Like the saying goes: “The person who practices one punch 10,000 times is more fearsome than the person who practices 10,000 punches.” The same principle applies to investing—whether you focus on meme or tech coins, the deeper your understanding, the better your outcomes.
What strategies are you using in this market? Share your thoughts!
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