The encryption market in the PVP era: How do retail investors break through?

Original text: RVM, compiled by Yuliya,

In the digital world of RuneScape, one of the most notorious predatory strategies in the ‘Wilderness’ area is ‘luring’. This technique involves exploiting the naivety and greed of unsuspecting players by enticing them into the dangerous depths of the Wilderness - a high-risk Player vs Player (PVP) area - through false promises of safety, profit opportunities, or goodwill.

This mechanism is simple yet effective. The decoy disguises as a helpful ally, offering enticing rewards or assistance, carefully constructing a narrative to establish trust and lower the victim’s vigilance. Once the victim enters the wilderness, the illusion shatters, and the predator reveals their true intentions - ambushing the target, depriving them of their belongings, leaving them with nothing.

This ancient strategy, stemming from psychological manipulation and opportunism, vividly demonstrates how social dynamics and trust can be weaponized in a zero-sum environment to extract value from others. This serves as a profound warning: promises of security or guaranteed returns often mask an asymmetric setup designed for the benefit of the initiator, while participants bear the cost.

Market Status

Liquidity dispersion and transient narrative

• Too many projects and blockchains: The cryptocurrency ecosystem is expanding rapidly, covering multiple blockchains, protocols, and tokens. This explosive growth seriously disperses the attention of traders, and a large number of new projects and “hot narratives” continue to emerge, competing for capital inflows. Each project and narrative tries to gain a share in the limited market, but this competition has led to a fragmented market overall.
• High-speed liquidity rotation: Liquidity in the market is shifting from one ‘hot spot’ to another at an unprecedented speed. Once a narrative loses its appeal, participants will quickly abandon it and chase the next opportunity. This pattern leads to short-term price spikes and rapid declines, creating ‘short-lived trends,’ with most traders failing to profit from them.

Key conclusion: Due to the emergence of numerous projects and frequent rotation of liquidity, any single narrative is difficult to sustain long-term price increases, and traders need to pay more attention to liquidity dynamics.

Synergies and Market Sentiment Differentiation

Opinion leaders driven by incentives: In the crypto market, key opinion leaders (KOLs) often promote projects based on personal interests. They use social media to guide market sentiment and drive short-term popularity of projects. This behavior leads to a lack of consistency in market narratives, further exacerbating market sentiment division.

Split market signals: The current market sentiment is contradictory. On the one hand, some macroeconomic indicators seem to indicate the arrival of a “bull market”; on the other hand, individual retail traders are generally losing money, and the market sentiment is extremely pessimistic. The inconsistency of these signals increases market volatility and confuses traders.

Key conclusion: Interest-driven remarks in the market and contradictory signals make the trading environment more complicated. Traders need to be wary of seemingly ‘authoritative’ viewpoints.

Bitcoin trading and the season of unreal altcoins

Seizing the Bitcoin uptrend: In this round of the market, the most lucrative traders are concentrated in the early stage of Bitcoin’s uptrend. By precise timing, they captured the opportunity for an uptrend earlier than retail traders. However, many retail investors are disappointed with the ‘low return expectations’ of Bitcoin, and thus have shifted funds to altcoins in an attempt to achieve higher returns.

Misjudgment of Retail Traders: Retail traders often avoid Bitcoin, considering its market value to be too high and its potential for further increase to be limited. They try to find the “next Bitcoin” and invest their funds in those altcoins with lower market capitalization but huge potential. However, this strategy mostly ends up in failure because the expected “altcoin season” does not come as expected but instead causes many to suffer losses.

Key conclusion: Professional traders have made significant returns in the Bitcoin bull market, while retail traders have missed out on opportunities by trying to bet on altcoins.

Solana vs. Ethereum: Meme Tokens and Liquidity Traps

• Short-lived Meme Craze: The popularity of meme tokens is represented by platforms like Pump.fun. These platforms have spawned a series of new tokens that rely on speculation and viral spread, and these assets lack actual value support but attract a large amount of retail funds. This phenomenon is essentially a speculative cycle: early participants try to profit from subsequent capital inflows, rather than based on the long-term development prospects of the project.
• Is it a public Ponzi scheme? The survival of Meme tokens depends on continuous attention and increasing liquidity. Market participants generally recognize its speculative nature - building a position before others buy at a higher price, creating a brief pump cycle.
• Ethereum, the former king of memes: Ethereum led the market frenzy with NFTs during the 2021 bull market cycle, and once again achieved significant gains compared to Bitcoin in early 2024 through tokens such as $PEPE and $MOG, bringing substantial profits to early participants.

However, on the eve of the Trump election, the overall market gradually turned into a sideways shock, with a large amount of momentum disappearing. As of the middle of 2024, there are few easy profit opportunities left, and current Meme traders face two major challenges:

1. The rise of professional market participants: Meme tokens, which now have a market value of billions of dollars, are actually competing with dominant liquidity providers such as professional players and algorithmic market makers.
2. The entry valuation of high-quality enterprises: Meme tokens are currently widely overvalued, making it difficult to reproduce the exponential rise in the market.

Key conclusion: Both the Solana and Ethereum ecosystems have been inundated with a large number of low market value tokens, further diluting liquidity. The early stage of easy profits has passed, replaced by a more risky market environment dominated by professional traders.

Hyperliquid and the Pursuit of Excess Returns

• Airdrop Bonus: With its generous airdrop program and innovative product portfolio, Hyperliquid has attracted a large number of active traders and liquidity. However, the influx of large-scale funds has also fueled reckless speculation.
• Trader’s Loss Status: According to platform data (such as profit and loss charts), most users engaged in short-term trading on Hyperliquid are experiencing losses, especially when chasing hot market trends. Despite the development potential of the platform, frequent rotation between meme coins and other high-risk assets significantly increases the probability of loss.

Key conclusion: Even on innovative platforms, the aggressive speculation and zero-sum game nature still exist. Traders frequently switch between different tokens in search of excess returns, but these returns often quickly evaporate when facing professional competition.

Comprehensive PVP: Insiders, Institutions and VC

• Information advantage imbalance: Insiders and institutional investors often have the ability to lay out in advance, holding information that ordinary investors cannot access. When retail investors follow price trends and market narratives, they often miss the biggest profit opportunities.
• The pace of listing and its market impact: “Listing frenzy” refers to the phenomenon of a token skyrocketing after the announcement of its listing on a mainstream exchange, further intensifying the advantage of insiders. Those in the know can accumulate chips in advance, while latecomers can only buy at high prices.

Key conclusion: The cryptocurrency market is essentially a high-risk ‘player vs player’ (PVP) game. Big players with large capital take advantage of information asymmetry and pre-positioning to maximize profits at the expense of disadvantaged groups with inferior information.

Excessive expansion of altcoins and the Trump token incident

• The liquidity vampire of dual tokens: Trump and Melania tokens perfectly illustrate how new tokens draw the last liquidity from an already exhausted market. This phenomenon is like a huge “liquidity black hole,” devouring the remaining funds in the market.
• Retail investors have become the last bag-holders: just like most fervor-driven token issuances, insiders have harvested most of the profits, leaving ordinary traders who entered later deeply in losses, further exacerbating the market’s pessimism and crisis of confidence.

Key Conclusion: Market illiquidity and continuous issuance of new tokens have exacerbated losses for ordinary participants, resulting in a market dilemma of “no one to take over”.

What is the future direction of the market?

• Rebound Potential Analysis: Despite the bleak outlook for the altcoin market, the continued adoption of Bitcoin by institutions continues to keep the market optimistic. Bitcoin maintains a strong upward trend at a price of $105,000. Positive news from governments or major regulatory agencies may reignite overall bullish sentiment.
• Stay vigilant about future market conditions: even if liquidity returns and market frenzy reappears, participants still need to remain highly vigilant. The market is still dominated by professional trading institutions and insiders, and the competitive environment is extremely intense.
• Shorten the trading cycle: In a fully competitive PVP market, quick in and out is often safer than relying on long-term trends. The era when it was easy to profit from buying and holding meme coins (such as in previous cycles or early 2024) seems to have temporarily ended.

Key conclusion: If macro conditions are in place and new participants enter the market, a positive atmosphere may reappear, but caution remains paramount. Traders should recognize the essence of the current market’s PVP and avoid excessive investment in short-term market narratives.

Deep in the mountains - proceed with caution

Final Thoughts

The ongoing theme of the current crypto ecosystem is the decentralization of funds and attention. This dynamic nature, coupled with the strong influence of insiders and the rapidly changing market narrative, puts ordinary retail investors at a disadvantage. While there is still the potential for a significant rise in a macro environment favorable to Bitcoin, market participants must respond to any uptrend with strategic and risk-controlled thinking.

Practical advice:

• Set realistic expectations - the era of easily gaining 10x returns may have temporarily passed.
• Diversify your investment wisely - Do not overly spread your funds across multiple speculative tokens.
• Maintain flexibility - Shortening holding periods and actively taking profits help cope with the PVP environment.
• Pursuing quality - focusing on projects with real value and strong fundamentals, rather than simply chasing speculation.

In the end, the era of “everyone wins” may have come to an end - the market game is more brutal and information asymmetry does exist. But as long as one remains highly vigilant and adept at identifying real opportunities, savvy market participants can still profit in this “wilderness”.