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

Original: RVM, Compiler: Yuliya, PANews

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

This mechanism is simple yet effective. The inducer will disguise as a helpful ally, offering enticing rewards or assistance, carefully crafting a narrative to build trust and lower the victim’s vigilance. Once the victim enters the wilderness area, the illusion will shatter, and the predator will reveal their true intentions - ambushing the target, depriving them of their possessions, 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 gives us a profound warning: promises of security or guaranteed returns often mask an asymmetric setup designed to benefit the initiator at the expense of the participants.

Market Status

Decentralized Liquidity and Transient Narrative

• Too many projects and blockchains: The cryptocurrency ecosystem is expanding rapidly, covering multiple blockchains, protocols, and tokens. This explosive growth has severely dispersed the attention of traders, with a large number of new projects and ‘hot narratives’ emerging constantly, 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 as a whole.
• 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 quickly abandon it and chase the next opportunity. This pattern leads to short-term price surges and rapid declines, creating ‘short-lived trends’ that most traders fail to profit from.

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

Overlapping Interests and Market Sentiment Differentiation

Incentive-driven opinion leaders: 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 the division of market sentiment.

Market signal of divergence: The current market sentiment is full of contradictions. On one hand, some macroeconomic indicators seem to indicate the arrival of a bull market; on the other hand, retail traders are generally losing money and the market sentiment appears extremely pessimistic. The inconsistency of these signals has increased market volatility, leaving traders more confused.

Key conclusion: the profit-driven discourse and conflicting signals in the market make the trading environment more complex, and traders need to be wary of seemingly “authoritative” views.

Bitcoin trading and the illusion of altcoins season

Seizing the Bitcoin uptrend: In this round of the market, the most profitable traders are concentrated in the early stages of the Bitcoin uptrend. They seized the upward opportunity earlier than retail traders through precise timing and layout. However, many retail investors are disappointed with the ‘low return expectation’ of Bitcoin and are therefore shifting their funds to altcoins in an attempt to achieve higher returns.

Mistakes of retail traders: Retail traders often avoid Bitcoin, believing that its market value is too high and the potential for further growth is limited. They try to find the “next Bitcoin” and invest in those altcoins with lower market value but huge potential. However, this strategy mostly ends in failure because the expected “altcoin season” does not arrive as anticipated, instead leading many into deep losses.

Key conclusion: Professional traders have achieved significant returns in the rise of Bitcoin, 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 Frenzy: The popularity of Meme tokens is represented by Pump.fun. Such platforms have spawned a series of new tokens that rely on hype and viral spread. These assets lack actual value support but have attracted a large amount of retail funds. This phenomenon is essentially a speculative cycle: early participants try to profit from subsequent fund inflows rather than based on the long-term development prospects of the project.
• Public Ponzi scheme? The survival of Meme tokens relies on constant attention and increasing liquidity. Market participants generally recognize its speculative nature - accumulating positions before others buy at higher prices, creating a short-lived pump cycle.
• Ethereum, the former king of memes: Ethereum led the market frenzy in the 2021 bull market cycle with NFTs, and achieved significant gains compared to Bitcoin again in early 2024 with 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 horizontal shock, and a large amount of momentum disappeared. As of the middle of 2024, there are few easy profit opportunities left, and current Meme traders are facing two major challenges:

1. The rise of professional market participants: Meme tokens, with a current trading market value of tens of billions of dollars, are actually competing with dominant liquidity providers and algorithmic market makers.
2. The entry valuation of high-quality enterprises: The current valuation of Meme tokens is generally too high to reproduce the exponential surge 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: Hyperliquid has attracted a large number of active traders and liquidity with its generous airdrop program and innovative product portfolio. However, the influx of large-scale funds has also fueled reckless speculation.
• Trader Loss Status: According to platform data (such as profit and loss charts), most users who engage in short-term trading on Hyperliquid are losing money, especially when chasing hot market trends. Although the platform has development potential, the frequent rotation between meme coins and other high-risk assets significantly increases the probability of losses.

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

Comprehensive PVP: Insiders, institutions, and VC

• Information advantage asymmetry: Insiders and institutional investors often can lay out in advance, they have access to information that ordinary investors cannot obtain. When retail investors follow price trends and market narratives, they often have missed the biggest profit opportunities.
• Timing of listing and market impact: “Listing Market” - the phenomenon of token skyrocketing after the announcement of listing on mainstream exchanges, further exacerbating the advantage of insiders. Insiders can accumulate chips in advance, while latecomers can only buy at high prices.

Key conclusion: The cryptocurrency market is essentially a high-risk ‘player versus player’ (PVP) game. Big players use the advantage of information asymmetry and early layout to maximize profits at the expense of disadvantaged groups with inferior information.

Excessive expansion of Shanzhai Coin and the Trump Token incident

• The liquidity vampire of dual tokens: The Trump and Melania tokens perfectly illustrate how new tokens drain the last liquidity from an exhausted market. This phenomenon is like a huge “liquidity black hole” that devours the remaining funds in the market.
• Retail investors have become the last bagholders: just like most hype-driven token launches, insiders have reaped most of the profits, while the latecomer retail traders are deep in losses, further exacerbating the market’s pessimism and confidence crisis.

Key Conclusion: Market illiquidity and continuous issuance of new tokens have exacerbated losses for ordinary participants, leading to a market predicament of ‘no buyers’.

What is the future direction of the market?

• Rebound Potential Analysis: Despite the bleak outlook for altcoins, the continued adoption of Bitcoin by institutions remains a source of optimism in the market. 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 alert to 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 exceptionally intense.
• Shortening the transaction cycle: In a fully competitive PVP market, quick in-and-out transactions are often safer than relying on long-term trends. The era when it was easy to buy and hold meme coins for profit (such as in the previous cycle or early 2024) seems to have temporarily ended.

Key takeaway: If macro conditions are favorable and new participants enter the market, positive sentiment may return, but caution remains crucial. Traders should recognize the essence of the current market PVP and avoid over-investing in short-term market narratives.

Deep in the mountains and wilds - proceed with caution

Final Thoughts

The ongoing theme in today’s cryptocurrency ecosystem is the decentralization of funds and attention. This dynamic nature, coupled with the strong influence of insiders and rapidly changing market narratives, puts ordinary retail investors at a disadvantage. While there is still the potential for significant gains in a macro environment favorable to Bitcoin, market participants must approach any upward trend with strategic and risk-controlled thinking.

Practical advice:

• Set realistic expectations - the era of easily achieving 10 times returns may have temporarily passed.
• Diversify investments wisely - Do not overly diversify funds into multiple speculative tokens.
• Maintain flexibility - shortening the holding period and actively taking profit helps deal with the PVP environment.
• Pursue Quality - Focus on projects with real value and strong fundamentals, rather than purely 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. However, as long as you remain highly vigilant and good at spotting real opportunities, savvy market participants can still profit in this “wilderness”.