The crypto world is becoming more like the US stock market, and the trading logic of retail investors has already changed.

Author: Xiao Shou Chuan Feng

Let's talk about why the crypto space will no longer see the kind of copycat seasons it used to, and how to cope with the future market.

In a nutshell: the cryptocurrency market is becoming more and more like the US stock market, and the current US stock market is also not what it used to be.

What was the US stock market like in the past, and what is it like now?

The typical path of the US stock market before 2010 was: entrepreneurship - growth - IPO - retail investor participation in growth - long-term compound interest (the company buys back itself through profits).

Duang Yongping also said: The only real buyer of a company is the company itself. It relies on its profits and will eventually buy itself back. However, there are many derivative states, so as long as the company finally makes money, when it earns to the point where you are in over your head, it will have no choice but to buy back.

For example, Tesla's IPO price was $17 (June 2010). Considering the 5-for-1 split in August 2020 and the 3-for-1 split in August 2022, the total return rate today is approximately 354.7 times. This is like the seven sisters of the U.S. stock market, where retail investors can participate in the company's growth from tens of billions to trillions.

The seven sisters of the US stock market all conform to this logic ↑ Retail investors only need to focus on understanding the corporate business logic and its core culture, then buy in and hold for the long term to basically benefit from the era's dividends in the US stock market. Buffett-style success is also attributed to the era's creation.

After 2010, the path of the US stock market became: entrepreneurship - losing money - long-term financing - continuing to lose money - new valuation highs - peak at IPO - capital recovery costs, profits & retail investors taking over (even if it can break even in the long term, it requires first peeling off a layer, incurring huge opportunity costs).

After 2010, with the significant increase in the size of VC, PE, and sovereign funds, the phenomenon of “long-term privatization” has emerged. For example, leading AI companies today, such as OpenAI, which is not yet listed, has a valuation of already 500 billion USD, and Anthropic has a valuation of 180 billion.

Round after round of financing has led companies to be valued at hundreds of billions before going public; by the time they are listed, the most “plump” segment of growth has already been consumed by the primary market, and ordinary investors are left with “being watered” instead of “being friends with time.”

Popular stocks may provide an early FOMO, short-term opportunity of several times, but just like new coins on Binance, some may rise for only two days after being listed. As long as you hold on, the last buyer is likely to be you. A typical example is Circle (CRCL), which on its first day of official trading, jumped from an issue price of US $31.00, with an opening price of about US $69, soaring to nearly 300, before continuously declining. Currently, the stock price has fallen to $70, a rollercoaster ride back to the opening price of the first trading day.

The current cryptocurrency market is actually the same; in the past, there were plenty of altcoins with market capitalizations in the tens of millions, offering many opportunities for hundredfold or even thousandfold returns. Now, any new coin casually comes in with a valuation of several hundred million or even billions, and most of them peak right after being listed, only to decline for several years while their market cap actually grows larger.

Whether in the US stock market or the cryptocurrency space, the market structure has shifted from “public growth” to “private development,” with capital dividends being prioritized. Now, many institutions participating in primary sm in the cryptocurrency space are even starting to lose money. The atmosphere within the circle has progressively escalated, leading both upstream and downstream of the market to rush for profits and hesitate to expand their vision. Against this backdrop, it has become increasingly difficult for retail investors in the cryptocurrency space to make big money through altcoins.

In addition, don't just focus on the US stock indices and the Seven Sisters; first ask how many people are trapped in CRCL. Since the beginning of this year, more than half of the stocks in the S&P 1500 have fallen, doesn't that resemble most altcoins in the crypto space?

How to respond:

1. In the cryptocurrency market, large funds for long-term investment can only focus on major coins like BTC, ETH, BNB, XRP, etc. (criteria: must have survived more than three bull and bear cycles while remaining in the top ten by market cap), rather than dollar-cost averaging into old altcoins or new altcoins that you believe have long-term potential in this bull market. Remember, even if the new altcoins in this cycle lead you to financial freedom, the fate of the old altcoins will eventually catch up with them.

The same goes for the US stock market. If you can't win by trading, just buy Berkshire Hathaway or the S&P 500 index. Alternatively, you can invest regularly in the 7 sisters (Apple, Microsoft, Amazon, Alphabet\google, Nvidia, Meta, Tesla). Looking at the long term, it's pretty much guaranteed to be profitable. However, making money doesn't mean you understand it, but if you really do this, it actually indicates that you do understand.

2. Short-term trading, new coin listings, regardless of the background, either don't believe or believe early, resolutely do not hold long, do not bottom fish, only do the first wave of short-term.

No matter how good the fundamentals and story are, they won't last long. Trump Coin and Circle (CRCL) have already taught everyone a valuable lesson. Don't be afraid of missing the “next Nvidia”; the likelihood is that you won't hit the next Nvidia, your principal has likely already been lost, and buying doesn't mean you can hold on. Most people would be better off recognizing themselves clearly sooner.

3. Stay away from contracts and leverage, especially in a market like cryptocurrency that is overly centralized and weakly regulated. Retail traders' trading data is seen as naked running by exchanges and market manipulators. In a situation of severe information asymmetry, one may win in the short term but will surely lose in the long term.

(The results of the trading competition organized by Synthetix have come out in the past few days, inviting many top traders in the industry. You can search for the specific results yourself.)