Shanzhai season or Shanzhai festival? Why is it easier to lose money in a bull market?

Source: Talking Li and Talking Outside

Today is another rainy day, so the little one didn't fuss about going out to play, but sat quietly at the table drawing, which gives me a chance to write some articles at home. While I was writing, there was thunder and lightning outside, so I asked her: Do you know why there is lightning in the sky?

She looked at me as if I were silly and answered decisively: Because there are power banks in the sky.

This answer completely caught me off guard, but I didn't correct her immediately. After all, for a kindergarten kid, I think her answer is quite creative. I'll take some time in the evening to teach her about thunder and lightning.

Back to the market. With Bitcoin hitting a new historical high again, ETH has also been performing well in recent days, currently maintaining a price around $3000. I hope this momentum can continue. If ETH can continue to break through and rise, we might welcome a new mini altcoin season.

In fact, the topic of altcoin season has been discussed by many people for quite a long time, to the point that it feels a bit like "the boy who cried wolf." Now, whenever someone mentions altcoin season, most people scoff because every time everyone is filled with expectations, but it often leads to disappointment. Therefore, a relatively unified viewpoint has emerged (a viewpoint that most people would agree with), which is that the traditional altcoin season (characterized by a general rotation and surge of altcoins) is difficult to replicate.

Including some partners in the group discussing this topic a few days ago, someone joked that instead of altcoin season, it should be changed to altcoin week, altcoin day, or altcoin second…

Rather than saying everyone is looking forward to an altcoin season, it might be more accurate to say that everyone is just looking forward to making money more easily during a bull market. However, the market often does not move as most people expect. When most people start to go long, it is likely to drop, and vice versa. As we mentioned in an earlier article: the main logic or play of the market is to make as many people lose money as possible.

For example, BANANAS31, which appeared multiple times on the gainers list a few days ago, after being pushed to a temporary high yesterday (July 11), began to plummet today when everyone's emotions were at a peak, with a single-day drop of 77%. As shown in the figure below.

It is hard not to sigh, yesterday it was still "altcoin season," and today it has directly turned into "altcoin sacrifice." Many people hope to make money easily during a bull market, but the end result often leads to losing money easily during a bull market.

Originally, during a bear market, everyone is not making money, and everyone seems equal, all being quite poor, but during a bull market, they end up losing money. Why is that?

This question has been discussed multiple times in our past articles, and to summarize simply:

Many people forget their trading discipline entirely because they continuously see someone making money or someone becoming rich overnight. The FOMO (Fear of Missing Out) impulse during a bull market leads many to chase trends, buy high, and leverage, completely losing the plans and cautious mindset they had during the bear market. They also feel that the money they lost can quickly be made back in the bull market, resulting in their original investment plans and goals slowly turning into a form of gambling, leading to even greater losses during the bull market.

Therefore, the first thing we need to overcome in this matter is our own FOMO mentality. Just as we mentioned in the previous article (July 10): as long as the market is still there, we will not lack trading opportunities. What we need to do is to persist and not be eliminated by the market. If your position management is not good enough or not disciplined enough, leading to significant losses (or being stuck) in your investment portfolio, then you won't have enough funds to seize new or even better opportunities.

Returning to the topic of altcoin season. Although the anticipated "altcoin season" often turns into "altcoin sacrifice," as we mentioned at the beginning of the article, if the upward momentum of the past few days can continue, especially if ETH can continue to break through and rise, we might welcome a new mini altcoin season again.

The mini altcoin season is just a definition we used in previous articles, differing from the traditional altcoin season in that the widespread rotation and surge of altcoins has transformed into a structural market, meaning a brief explosion in a certain sector (like AI, RWA) or significant price increases in specific projects (like PEPE, TRUMP) during certain short cycles.

I remember in the article on July 1, we discussed the potential situations facing the third quarter, focusing on several aspects:

• This year's third quarter should be a relatively important market period from a macro cycle perspective, which we might call: the intersection season of crypto regulation and market transformation. Whether at the macro level, political level, policy level, or market level… we may continue to witness some different changes.

• If the upcoming developments based on various macro or policy aspects do not meet market expectations (new black swans appear), then we cannot rule out the possibility of experiencing another wave of corrections or significant fluctuations starting in the third quarter. However, if the script does not change, we are very likely to see Bitcoin continue to break new historical highs in the third quarter.

• If Bitcoin can continue to set new highs similar to the last bull market (comparing the current market with the situation in September 2021), then it is likely that Bitcoin's dominance will decrease, and we will have the opportunity to see the mini altcoin season for the fourth time.

• Besides Bitcoin, if altcoins hope to allocate some positions again, it is best to focus on narrative fields such as Stablecoin and RWA. For example, in the case of Stablecoin, projects related to stablecoins like AAVE and ENA still have some performance space.

From the actual market trends over the past two weeks, due to the overall relatively optimistic macro and policy environment (no new black swans have appeared), Bitcoin broke through historical highs earlier than we originally expected, and Ethereum also began to break through key short-term resistance levels, with many altcoins rising over 10%. For example, the highest increase of AAVE in the last 7 days was around 18%, and ENA's highest increase in the last 7 days was around 50%.

Although due to the recent rise, many people's emotions seem to have changed again, we will still maintain the cautious attitude towards the overall market in the third quarter as stated in previous articles. If Bitcoin really reaches around $130,000 in Q3, then there will likely be some altcoin opportunities, but it may also experience a new round of phase corrections or fluctuating markets, lasting about 1-2 months, and it is not ruled out that Bitcoin may pull back to around $100,000, while altcoins may face at least a 20-30% correction.

As we mentioned in the previous article (July 10), regarding making money, some people focus on the current price being high or low, while others focus on the cyclical patterns. Whether for long-term trading or short-term trading, it is essential to think clearly about how much you can (aim to) earn when right and how much you can (accept) lose when wrong. Opportunities and risks are often proportional; a surge is for a better drop, and a drop is for a better surge. In the later stages of a bull market, preserving profits is more important than taking higher risks to gamble.

Many people, when faced with unexpected market changes, habitually say, "This time seems different," but in terms of human nature, it seems that nothing is ever truly different. Just yesterday, while observing daily discussions in the group, a partner said something quite fitting: retail investors have their own logic; they buy when they see others making money and sell when they see themselves losing money.

I think the above statement is quite vivid. I remember at the beginning of this year, when Bitcoin was around $100,000 and market sentiment was relatively high, many people confidently said they would buy as soon as Bitcoin dropped to $70,000. As a result, when Bitcoin actually dropped to around $70,000, the voices of people wanting to buy Bitcoin were hardly heard. Similarly, last year (2024), when Bitcoin dropped from $70,000 to $50,000, many people also did not buy when it actually fell.

The same question arises: if Bitcoin has the opportunity to rise to $120,000 or $130,000 and then drop back to around $90,000 or $100,000, would you consider buying?

I estimate that most people who missed the opportunity still wouldn't buy, and the later it gets into the bull market, the higher the phase risk of buying will be, especially for those with short-term trading goals. They will continue to think that Bitcoin has already risen so much, and the next increase will certainly be limited, so it is better to buy some altcoins or meme coins recommended by bloggers for a chance.

However, regarding altcoins, we have discussed multiple times in previous series of articles that for a period, it has been very difficult for most altcoins. Under the influence of the macro environment, changes in market structure, and severely diluted liquidity, it is challenging to accurately predict which project (token) will be the next hot speculation in advance. It seems that only those products (projects) with revenue-generating capabilities are worth looking forward to in the medium to long term.

Here are a few examples of projects:

For instance, Hyperliquid (HYPE), which has performed relatively well in terms of price for some time, has now become one of the dApps with the highest fees. As shown in the figure below.

However, since the current market cap of this project has reached $15.5 billion (currently ranked 11th with a price of $47), and the Mcap/TVL ratio is 33.39, although there may still be some upward opportunities, we believe the short-term upside potential is limited. If you still want to participate in such a project now, you should consider lowering your profit target.

Similarly, Pendle, AAVE, and other projects have also been mentioned multiple times in our previous articles. In the article on March 28, we discussed: setting aside price factors, I have always believed that projects like Pendle and AAVE belong to the category of good projects because they can generate sustainable income. As shown in the figure below.

Currently, Pendle is ranked 101st in market cap with a Mcap/TVL ratio of 0.13, while AAVE is ranked 29th with a Mcap/TVL ratio of 0.16. Therefore, regarding the above projects, if you want to select projects based on the dimension of income + market cap, then theoretically, Pendle or AAVE seems to have greater opportunities.

Of course, the above is just a simple example based on the single dimensions of project income + market cap. You may also need to consider other dimensions or indicators for a more comprehensive evaluation to improve your investment success rate, such as token unlocks, product roadmaps, project investments/collaborations, etc.

Moreover, the projects mentioned above, Hyperliquid, Pendle, and AAVE, all belong to the DeFi Yield track. At the same time, we also mentioned in the previous article (the one we referred to on March 28) that from a medium to long-term narrative perspective, DeFi, Stablecoin, and RWA are narratives worth looking forward to and focusing on this year.

We have discussed the topic of Stablecoin quite a bit in our recent articles, so let's briefly talk about RWA again. For a long time, many people (retail investors) have not been optimistic about the RWA field, but some large companies are continuously laying out, such as BlackRock launching its own on-chain fund, JPMorgan launching a stablecoin on the Base platform, and Robinhood introducing tokenized stocks on-chain…

We expect that as more companies participate in tokenization this year (currently, many companies are mainly speculating based on the stock market), this speculative effect may also return to some parts of the crypto field and have a positive impact on some tokens related to the RWA track.

In other words, the RWA narrative in the third quarter (or fourth quarter) of this year is theoretically worth everyone's attention. Of course, I cannot directly tell you which RWA token will make money, but we are merely providing a thought or perspective. According to data from the Coingecko platform, there are currently over 500 projects under the RWA concept. If you are interested in such projects, you might want to focus on researching and monitoring from two angles:

1. Those RWA projects that already have relatively successful products.

2. RWA projects that have the ability to continuously attract more on-chain funds.

To facilitate some new partners in their research, let's list a few relevant RWA projects:

For example, Ondo Finance, which was recently reported in Cointelegraph that they will acquire a compliant brokerage platform, Oasis Pro, and plan to launch tokenized stock trading services for non-U.S. users in the coming months. This means Ondo is intensifying its efforts in the tokenization business. Currently, Ondo already has tokenized bond products like OUSG (short-term treasury bonds) and USDY (yield-generating dollars), and they also plan to launch a dedicated cross-chain bridging tool to enhance asset transfer and jointly launch a $250 million RWA investment fund with Pantera. Overall, Ondo appears to maintain its leading position in on-chain U.S. treasury bonds.

Another example is Backed Finance, whose recently popular product xStocks is a series of tokenized securities backed 1:1 by real stocks. This product officially launched at the end of June and has since introduced over 60 tokenized stocks, including Apple, Tesla, and Nvidia. They are expected to continue expanding to more DeFi platforms in the third and fourth quarters of this year. However, the project has not yet launched its own platform or governance token, only xAssets (i.e., tokenized real-world assets).

Additionally, there are Chintai Network (planning to bring RWA assets into the Bitcoin ecosystem), Robinhood (one of the main promoters of Tokenized Stocks), Lendr Fi (reportedly about to launch its mainnet, introducing a liquidity token called LsRWA for protocol collateral and yield)…… etc. Interested partners can further explore and pay attention to these.

That's all for today. The images/data referenced in the text have been added to the Talking Li and Talking Outside Notion. The above content is just personal opinions and analyses, intended for learning records and communication purposes only, and does not constitute any investment advice.