Trading Strategies in FOMO Market: 7 Key Considerations

1. The Phenomenon of Rapid Rise in Altcoins

Recently, the altcoin market has shown a rapid upward trend, with large-cap altcoins like Chainlink and Solana leading the way, followed by a swift follow-up from low-cap and meme coins. This phenomenon of rapid increase reminds people of the market situation from late 2019 to early 2020, when there was also a similar quick surge that ultimately proved to be a bull market trap. Whether the market is repeating this scenario or if it is purely driven by investors' panic psychology is worth our in-depth consideration.

2. Ethereum's performance lags behind

Compared to other mainstream cryptocurrencies, Ethereum's performance has been disappointing. From early October to mid-November, Ethereum only increased by 18%, far below Bitcoin's 30% increase, not to mention Solana's 120% increase. Even some public chains that usually underperform, such as Cosmos, saw an increase of 22%, surpassing Ethereum.

This lagging performance may be related to Ethereum's staking mechanism. Since the Shanghai upgrade, more and more ETH has been locked in staking contracts. While staking helps stabilize prices, it also limits speculative demand. When investors exchange ETH for other rising altcoins, ETH faces ongoing selling pressure.

3. Beware of the risks of VC coins like Solana

As the market warms up, some venture capitalists are starting to pay attention to the cryptocurrency market again. Solana, as a typical VC coin, has a large portion of its token distribution allocated to internal investors. It is worth noting that the SOL tokens held by FTX/Alameda will gradually unlock before 2028, which may bring potential pressure to the market.

4. Pay attention to the project team's selling trends

When the market is rising, all parties may take the opportunity to sell off assets, including project development teams, early investors, and even some struggling exchanges. Although selling early in a bull market is often proven to be a mistake, investors still need to be wary of becoming the exit liquidity for others. Especially when the project party continues to sell off, it may indicate that they have lost confidence in the project.

5. Situation of Stablecoin Inflows

Recently, there have been reports of a significant influx of stablecoins into the market. Verified data shows that approximately $3 billion in stablecoins has flowed in, but this figure is still relatively small compared to the capital outflow of last year. This funding is likely coming from existing cryptocurrency investors rather than new over-the-counter funds. What can truly drive a bull market is the influx of new capital from outside the crypto market.

6. Keep a close eye on the progress of Bitcoin ETF

The Bitcoin ETF is expected to be approved in early 2024, but there may be delays. Traditional asset management companies suggest that clients allocate 1-5% of their overall investment portfolio to cryptocurrencies, while also emphasizing the high volatility risks associated with Bitcoin. Therefore, one should not overly expect a massive influx from the traditional financial sector into the crypto market.

The approval of an ETF could become a "sell the news" event, similar to the trend observed with Dogecoin when Tesla CEO Elon Musk appeared on Saturday Night Live. There are still a few months until the official launch of the ETF, during which there may be news of the SEC delaying approval, which could instead sustain bullish sentiment in the market.

7. The market still has uncertainties

Currently, there is a divergence in the crypto community regarding whether the market will continue to rise. This increase feels similar to the market in the first half of 2023, with significant fluctuations in investor sentiment. Recently, a pin-shaped candlestick in altcoins has liquidated a large number of long positions, indicating that market liquidity is still insufficient and that short-term speculative sentiment is relatively strong.

From the comparison of spot trading volume and contract trading volume, most of the trading volume is still concentrated on perpetual contracts. This suggests that the market may still experience significant volatility. An ideal bull market typically shows a slow upward trend rather than large fluctuations. However, each market cycle may vary, and investors need to stay vigilant and manage risks appropriately.