Current market situation: AI sector plummets, where has the liquidity gone?

This month, cryptocurrencies in the AI sector generally suffered a heavy blow:

- #VIRTUAL Down 40%

- #FARTCOIN Down 30% this week

- #AIXBT Down 35% this week

- #ZEREBRO RO plummeted 85% this month

- #MOBY This week down 45%

- $BUZZ down 65% this week*

Market sentiment is panic, capital is flowing out on a large scale, and the AI narrative has entered a low period. So, how should we respond next?

Viewpoint 1: Liquidity is leaving

This round of decline is not a problem with a single project, but a liquidity crisis in the entire AI sector.

Good news: This does not mean your project has no value.

Bad news: If capital does not flow back in, these tokens are likely to remain at low levels for a long time, and it may even be difficult to reach new highs.

Viewpoint 2: Fundamentals are irrelevant

Many supporters of the AI sector believe that although prices are falling, fundamentals are continuously strengthening. This logic is completely untenable.

- This round of decline has completely detached from fundamentals, meaning past valuations are also detached from fundamentals.

- Price increases are not due to improved fundamentals, but driven by market sentiment and speculative demand.

- What the AI sector needs is market hotspots, not gradual technological progress.

In other words, the market needs a new 'exciting point' to attract speculative funds back, rather than just simple fundamental improvements.

Viewpoint 3: Liquidity rotation is occurring

Observing market trends, we can find:

- Mainstream large market cap tokens perform well, while on-chain small market cap tokens face sell-offs.

- Capital is likely flowing from the AI sector into large market cap tokens, i.e., the 'chase the rise effect.'

Conditions for capital to flow back into the AI sector:

Large market cap tokens have stopped rising

The market's interest in AI agents continues to exist

No new hot narratives capturing market attention

Looking back at the beginning of the year, the Memecoin sector also experienced several rounds of sharp declines, but ultimately, after market sentiment recovered, they welcomed another surge. Will the AI sector also experience similar capital inflows? The answer is worth pondering.

Viewpoint 4: It is not recommended to buy the dip in the AI sector

Many people may think that AI tokens have fallen low enough now, should they take the opportunity to buy the dip?

I do not recommend doing this for the following reasons:

It is difficult to accurately buy the dip, and the market may continue to decline.

High uncertainty, even if prices rebound, they may not return to historical highs.

Optimal strategy: Maintain stablecoin positions and wait for the market to recover.

When market sentiment improves, making money becomes easier; why take risks during the hardest times in the market?

Conclusion

The current market sentiment in the AI sector is still sluggish, and capital is rotating towards large market cap tokens. In the short term, the possibility of recovery for AI tokens is low, and it is recommended to patiently wait for new market hotspots to emerge. For investors, the best strategy now is to maintain liquidity and wait for better entry opportunities, rather than blindly buying the dip in a market environment full of uncertainty.