I. The Underlying Logic of Sector Rotation: The Triangle Game of Capital, Narratives, and Technology
1. Liquidity-Driven 'Ripple Effect'
- Fund Flow Patterns: After the Federal Reserve's interest rate cuts, the total market cap of crypto soared from $4.2 trillion to $7.8 trillion, but the funds were not evenly distributed. The 'core assets' represented by BTC/ETH saw their capital absorption share drop from 75% to 52%, while remaining funds spread to small and mid-cap sectors, creating a ripple-like rotation path.
- Typical Phenomenon: After Bitcoin broke $100,000 in January 2025, funds rapidly shifted to the AI + DeFi sector (such as Render Network +320% in a month), and in March rotated to RWA protocols (such as Ondo Finance's weekly trading volume surging 470%) [[7].
2. Self-Reinforcement of Narrative Cycles
- Policy Narrative: The Trump administration's 'Crypto New Deal' directly detonated the Meme coin (TRUMP coin's market value exceeds 100 billion) and the compliance stablecoin track (such as Standard Chartered's USDC custody volume surging) [[3].
- Technical Narrative: After Ethereum completed its 'Quantum Resistance Upgrade', privacy computing protocols (Aztec Network) and the ZK-Rollup ecosystem (zkSync) saw weekly gains exceeding 80%.
3. Critical Point of Technological Maturity
- Infrastructure Breakthrough: AI agent trading on the Solana chain accounts for 35%, supporting the DeFAI (Decentralized AI) sector explosion;
- User Experience Inflection Point: MetaMask launches zero Gas fee cross-chain solutions, pushing daily transaction numbers of GameFi users to exceed 100 million [[7].
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II. Historical Rotation Patterns and Current Stage Positioning
Stage One (2024 Q4 - 2025 Q1): Core Assets Bottoming, Capital Gaining Strength
- BTC/ETH: Benefiting from the Fed's interest rate cuts and Bitcoin ETF approvals, increases of 120% and 90% respectively, but their market cap share decreased from 68% to 55%;
- Market Characteristics: Dominated by institutional funds, volatility 7]()]
Stage Two (2025 Q2 to Present): Sector Differentiation, Rotation Acceleration
1. First Tier (AI + DeFi/RWA)
- AI agent protocols (such as Fetch.ai): TVL exceeds $40 billion, with daily AI model calls exceeding 200 million;
- RWA Track: BlackRock tokenizes $30 billion in government bonds through Ondo Finance, attracting traditional investors with an annualized yield of 8.5% [[7].
2. Second Tier (Infrastructure/Compliance Ecosystem)
- Layer2 Solutions: zkSync's daily transaction volume exceeds 120 million, with Gas fees dropping to $0.001;
- Compliant Stablecoins: PayPal's PYUSD circulation exceeds 80 billion, with cross-border payments accounting for 12% [[3].
3. Third Tier (Meme/Metaverse)
- Meme Coin Frenzy: The Trump family issues a coin, causing congestion on the Solana chain, with TRUMP coin's daily trading volume exceeding that of Bitcoin;
- Metaverse Revival: Apple Vision Pro 3 sales exceed 10 million, Decentraland's daily active users rebound to 250,000 [[7].
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III. Three Practical Strategies for Capturing Rotation Opportunities
Strategy 1: Monitor the 'Migration Traces' of On-Chain Funds
- Data Tools:
- Nansen's Smart Money Tracking: Institutional wallet inflows into the AI sector increased by 230% month-over-month in March;
- Glassnode stablecoin market cap growth rate: When USDT's market cap expands by 18% in a month, it often signals the start of altcoin trends [[7].
Strategy 2: Anticipate the 'Emotional Leverage' of Narrative Cycles
- Case Review:
- In February 2025, the U.S. passed the (Crypto Banking Act), compliant sectors (Coinbase stock +40%) led the market for two weeks before funds quickly shifted to privacy coins suppressed by policy (Monero +65%);
- One month before Ethereum's upgrade, Layer2 tokens (such as ARB, OP) had an average increase exceeding 120% [[7].
Strategy 3: Effectively Utilize Cross-Sector Hedge Compositions
- Classic Configuration Model:
- Aggressive (70% allocation): RWA Leaders (ONDO) + AI Computing Protocols (RNDR);
- Defensive (20% allocation): BTC staking derivatives (such as stBTC) + compliant stablecoin interest-earning (such as USDC @ Aave);
- Speculative (10% allocation): High volatility Meme coins (TRUMP/DOGE) [[7].
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IV. Risk Warning: Deadly Traps in Rotation
1. Liquidity Siphoning Effect
- Case: In mid-March, $8 billion of funds flowed out of the AI sector in a single day, causing RWA tokens like Ondo Finance to plummet 35% in 24 hours.
2. Capital Games Wrapped in Pseudo Narratives
- Be wary of vague concepts like 'AI + Blockchain Games', as 23 projects have been confirmed to plagiarize ChatGPT open-source models by 2025.
3. Implementation Gap of Technological Upgrades
- Solana network crashed for 8 hours in early March due to a surge in AI trading, causing SOL's price to fluctuate by 42% in a single day.
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V. Forecast and Operational Suggestions for Rotation in the Next Month
1. Expected Rotation Path
- Current Hotspot: RWA protocols (35% of capital inflow) → Next Stage: Privacy Computing + ZK Technology (reverse game under policy suppression expectations) → Potential Dark Horse: Decentralized Physical Networks (DePIN) [[7].
2. Retail Investor Action List
- Immediate Action: Reduce positions in Meme coins that have increased more than 300%, and shift to RWA protocols with TVL growth >50%;
- Continuous Monitoring: The Federal Reserve's April meeting; if it signals a pause in interest rate cuts, leverage ratios need to be quickly lowered;
- Ambush Targets: Modular Blockchains (Celestia), Decentralized AI Training Protocols (Bittensor) [[7].
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Conclusion
Sector rotation is not a zero-sum game, but a collective vote of capital seeking certainty amid uncertainty. Rather than chasing every wave, regular investors should focus on two types of opportunities: long-term alignment with national strategies (such as RWA compliance) and short-term capture of sentiment mismatches (such as oversold privacy protocols). Remember, the most dangerous thing in a bull market is often not 'missing out,' but 'overcommitting at the wrong time.'
Interactive Topic: What opportunities have you captured during sector rotations? What pitfalls have you encountered? Feel free to share your stories!
(Risk Warning: The market is risky, this article is for sharing opinions only and does not constitute investment advice)
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Data Support: CoinGecko, Nansen on-chain data, Federal Reserve announcements [[3][5][7]
