When will the altcoin season come? This is the most concerning question for all crypto users.
Today, I will discuss the reasons why the altcoin season arises in the crypto industry's development history and past analyses, why the current altcoin season is collapsing, and the conditions needed for the altcoin season to return.
Many are looking forward to an altcoin season bull market, but most do not understand what an altcoin season is. Here, I will give a very blunt definition: a market with a sufficiently long duration and enough tokens rising.
Because only such an altcoin season can create opportunities for retail investors to profit. Just a few projects fluctuating do not constitute an altcoin bull market because retail investors cannot find opportunities to seize.
From the past history of the crypto market, there have only been three major phases: the first is the ICO bull market; the second is the DeFi bull market; the third is the Metaverse and NFT bull market, and of course, there is the inscription and MEME bull market. I will first give a conclusion, followed by an analysis. My conclusion is that ICOs, DeFi, the Metaverse, and NFT bull markets brought enormous capital accumulation to the industry, while the inscription and MEME bull market are the 'surface reasons' that crushed the altcoin season.
To be precise, ICOs, DeFi, the Metaverse, and NFTs brought a massive influx of risk capital into the crypto market. We must recognize that venture capital is the most crucial factor in promoting the altcoin season. Don't listen to various KOLs and teachers randomly criticizing VCs and institutions; we must understand the essence.
Why do I say this? First, let's talk about the logic of venture capital. The essence of venture capital is a few people gathering some money from a group to invest in projects that have not yet formed stable profits.
At this time, due to uncertainty about whether one can make money, it is possible to purchase more dividend rights. When the project starts making money, one can earn more; similarly, due to uncertainty, one will also take on greater risks.
So why would a venture capital firm invest in a project? Either they look at the person and judge the probability of future success based on past successes, or they look at the PPT to see if someone has made a lot of money before in the same field, and how convincing the claims are.
Looking at the crypto market, to increase the market capitalization, what is needed is money, an endless influx of money. With money coming in, there will be startup teams and technological development.
Then new technologies will attract new money, and so it goes. This money is not from retail investors like us, but big money. So what kind of big money will come in? The first to come in is not stable big money.
Because Bitcoin, the largest asset in the crypto market, is not an income-generating asset, it does not conform to value speculation logic. Money with low risk preference will not come in. So what are the remaining large amounts of money? Venture capital.
Everyone can compare the explosion of crypto projects and market capitalization from 2016 to 2022, which is closely related to the money coming from venture capital. Especially in 2021 and 2022, it was the peak period for market capitalization explosion. The early projects from 2017 and 2018 gained the highest multiples during this period, such as Theta and AAVE.
During the bull market of DeFi, decentralized finance is a concept that can be understood by Wall Street and venture capital institutions, which has a logical explanation and immense disruptive potential. It has attracted top internet and technology venture capital firms for initial attempts in the entire industry, with A16Z representing these VC firms.
The market during this period, driven by these VCs' high-profile internet strategies, pushed the entire crypto industry's market value into its first bubble, leading to a large number of projects with market values of over ten billion, such as Dage, dot, Sol, and UNI.
Subsequently, the concept of the Metaverse and NFTs exploded in the internet era, along with the super returns of early venture capital, prompting many top institutions to rush in, including Sequoia Capital, SoftBank, and various big players.
These naive investors have reaped the benefits of Web2, and now they see the discussions around Web3, which includes the Metaverse and DAOs. Every now and then, they hear about market sizes in the trillions and see predecessors quickly obtaining hundreds to thousands of times returns in games like Axie, then they think, since it's like this now, wouldn't it be crazy in the future? They don't understand this or that, and they get excited hearing a concept.
Throughout 2021 to 2022, a large amount of venture capital flowed into the infrastructure sector (public chains, scaling technologies, developer tools), NFT & Metaverse sector, blockchain gaming, DeFi, CeFi, and social fields. At that time, the perceived turning point was the collapse of LUNA. I tell everyone that it was not; even without LUNA at that time, there would have been LUNB and LUNC to become the triggers for the bear market. The essence is that the current business model of the crypto market lacks the ability to bring concepts to fruition.
Thus, the development of these concepts and applications will go through phases of 'new stage technological innovation' and excessive technological investment. When entering a phase of excessive technological investment, incoming funds will decrease, and once they start to decline, the crypto industry, accustomed to high leverage and distributing absurdly high returns through CeFi, will face explosions, leading to bubble bursts.
Okay, a large amount of off-market venture capital has been destroyed by over 90% during the bear market of 2022. Starting in 2023, venture capital not only faced a large-scale sharp decline, dropping from $30 billion a year to $10 billion a year. Additionally, the structure of venture capital has undergone fundamental changes.
From 2021 to 2022, there were six major categories in the crypto venture capital pool:
Crypto-native venture capital funds: During this phase, 49 new funds were established, with an average fund size of about $300 million. 62% of managers with fundraising experience in 2020 continued to raise new rounds of funds in 2021.
Cross-industry technology and traditional VC: Represented by Andreessen Horowitz, in 2021, their Crypto Fund III raised $2.2 billion, and in 2022, they initiated a $4.5 billion mega fund, indicating mainstream tech VCs' deep layout in the crypto space.
Corporate venture capital (CVC): Including investment arms built by crypto giants like Binance Labs, Coinbase Ventures, and OpenSea Ventures, providing both equity and token investment channels for startups; FTX Ventures acquired a 30% stake in SkyBridge Capital in 2022, increasing penetration into external asset management companies.
Institutional investors (LP): Many university endowment funds and pension funds in the U.S. have begun including digital assets in their allocations — MIT's endowment fund is investing $200 million in Bitwise for a five-year lockup period in 2024; Yale, the University of Texas, and others have also increased their positions recently to avoid missing potential gains.
Family offices and high-net-worth individuals: A 2021 survey showed that 47% of U.S. family offices and 43% of financial advisors have ventured into digital assets, making them significant contributors to venture capital funds.
Hedge funds and large asset management: Citadel Securities and Soros Fund Management continued to bet on targets like Silvergate and Marathon Digital in the fourth quarter of 2022, maintaining their strategic allocation.
Among these six categories of venture capital, except for crypto-native venture capital funds and corporate venture capital, all are fresh retail money.
After entering the years 2023 to 2025, the early biggest unsuspecting investors, cross-industry technology and traditional VCs, have gone silent, while traditional institutions, asset management giants, family offices, and high net worth individuals have turned their focus to Bitcoin ETFs. Only crypto-native capital and corporate strategic investments are still increasing their investments in ecological projects.
The money at this time is all from within the market.
Well, let me ask everyone. If crypto projects are not profitable, and venture capital money has come in, yet new VCs are not ready to take over — where is the money made? How do we earn it?
Doesn't that just mean raising valuations in the primary market, using high market caps and low liquidity in the secondary market, and through colluding with market makers for currency value management to 'recoup losses'?
Retail investors may be naive, but they are not completely foolish; if they want to make profits, they need innovative models. However, besides money, VCs lack imagination the most.
After the old tricks failed, they couldn't account to investors above, nor could they harvest retail investors below, and they faced daily criticism. The big VCs still could manage, but they could only cut small VCs, leaving small VCs to be the ones being bullied.
At this point, the altcoin season bull market has already been put on pause, so you will notice that after August 2024, I hardly talk about buying into the altcoin season. Either the projects are trash, or the valuations are too high and undeserving.
Of course, if it were only this, the current situation would not have occurred. Retail investors have begun to react against VCs, their vigilance has increased, and they will hold tight to their wallets, leaving room for development.
Unfortunately, the popularity of Bitcoin inscriptions and MEMEs has drained the last remaining liquidity in the market like a big fire.
First, the money from venture capital in Bitcoin inscriptions and MEME sectors cannot come in; whose money is inside? Retail investors.
The first wave of retail capital destruction was the Bitcoin inscriptions. Starting in May 2023, although derivatives like ORDI have seen tenfold increases, there are few cash-out individuals and many trapped investors. Retail capital flowed to Bitcoin miners.
Then, in November 2023, the inscription market reached another peak, and retail money was once again siphoned off by market makers, early players, speculative funds, and project teams in currency value management. Oh, and there was also money lost to fraudulent projects.
The second wave of retail capital destruction is the MEME craze; this round of the MEME bull market is the most thorough destruction of retail capital.
Starting from PEPE in 2023, the MEME craze has transitioned from Ethereum to Solana, with a 2-4 week volatility cycle, almost wiping out 90% of retail investor funds. If it weren't for the new retail funds brought in by Solana, the MEME craze should have ended a year earlier.
Finally, in January 2025, Trump issued the Trump token, which grew from 0 to hundreds of billions in market capitalization in 36 hours, marking the final fireworks.
Given this, can you expect the altcoin season to have a long enough duration and enough tokens rising? Logically, it doesn't make sense.
At this time, what is the significance of participating in the altcoin season? Either you are dealing with overvalued projects waiting for you to fill the gaps, or there are market manipulators creating MEME tokens, setting up benchmarks to collect your principal.
The trends of Bitcoin and other tokens already indicate the problem; empty talk is meaningless; position and market capitalization are key.
As I write this, Bitcoin has risen again, breaking $90,000, and other altcoins are also rising. But which logic supports Bitcoin and which supports the rise of altcoins is more questionable?
In the future altcoin season, or altcoin bull market, it must have new unsuspecting venture capital coming in to see improvement. But the new unsuspecting investors are also scared from being cut, and to make them forget past losses, we need to present a concept that has never appeared before.
For the altcoin season, the best course of action is to focus on this 'unprecedented concept' and do less of everything else.
