Crypto Market Outlook: AI May Become the Next Hot Spot

I have more time to think this weekend, and I would like to share some thoughts about the market.

I believe that the overall directional trend of the crypto market will only become clear after September. Considering the macroeconomic headwinds, summer liquidity constraints, and quarterly position adjustments, the real market dynamics will only manifest when market participants return after the August holidays. From recent market activity, the rise of most altcoins has mainly been driven by short squeezes. Traders have been influenced by the reflex to chase after the previous rebound, but there is a lack of real long-term holder support. As expected, most tokens that skyrocketed subsequently experienced similarly severe corrections.

Ethereum has unexpectedly rebounded, with AI-related sectors leading this wave of recovery. On the other hand, tokens with practical use cases, strong fundamentals, or buyback mechanisms have shown resilience, being not only more stable during downturns but also recovering faster. Syrup, Hype, and AAVE are great examples. Although SPX is a small coin, its structure is completely different. From this, we can draw the following insights:

1. The demand for Bitcoin is real and persistent.

Traditional capital is gradually entering through regulated channels such as ETFs.

The nature of capital supporting BTC is completely different from previous cycles. This is why large-scale BTC liquidations are unlikely to occur unless triggered by macro events.

2. The differentiation within small cryptocurrencies is intensifying.

Ultimately, the funds will flow back to small tokens, but they will not be fully covered. Only tokens with clear purposes and practical application scenarios are likely to attract these funds. This is why I believe Ethereum will outperform other public chains. Clear regulations, increased DeFi usage, deflationary structures, and staking demand together create a strong positive feedback loop. Moreover, due to ETH's long-term failure to meet expectations, there are still marginal buyers waiting in the over-the-counter market.

3. Tokens supported by venture capital carry structural risks.

Token unlocks will continue to put pressure on prices. In the case of insufficient liquidity, the ongoing selling pressure from validators and early investors limits the upside potential. This is why I believe that the prospects for highly valued tokens listed on centralized exchanges are poor. Certain ecosystems' tokens, in particular, face ongoing selling pressure due to their validator reward structures.

4. The meme coin has structural advantages.

Meme coins have structural advantages, with no venture capital unlocks, fair distribution, and are entirely based on attention. This is a purely speculative mechanism that works effectively in the first cycle.

But I think this stage is coming to an end.

The emergence of certain token generation events and the launch of popular meme coins marked the peak of interest in meme coins. After that, interest in meme coins began to wane. Even during the rebound in April, the performance of certain public chains was not as good as ETH - if everyone is already holding, who will be the marginal buyer when the momentum for meme coins fades?

Some meme coins may still perform well, especially those that have gone viral outside the crypto market, such as on TikTok or Instagram, driven by influential personalities. These may still bring about asymmetric wealth effects. However, the era of "cute animal coins" as alpha has ended. Only those coins with strong narratives and broad market recognition hold true speculative value.

Ironically, the fatigue and skepticism towards venture-backed tokens have opened the door for fair launches of Web2/3 projects, which will become the next wave of wealth creation opportunities.

Some projects are excellent examples. But to seize these opportunities, you need to be active on the chain. When there is information asymmetry, big opportunities always arise. Once everyone knows something, it no longer has returns.

This is why I pay more attention to the on-chain market. The success of certain projects has ignited the desire to find the "next hot" one, and capital has begun to chase similar fair issuance narratives. Just as some have made huge fortunes trading meme coins - attention directs capital flow.

( 5. Future market trends

So, if meme coins are no longer the opportunity... what comes next?

My view: The combination of AI and encryption.

If you have been following my updates, you would know that most of my operations during this cycle - after early bets on certain public chains and venture capital-supported tokens - have focused on meme coins and AI.

Just like the DeFi summer, most early AI projects failed after the hype. However, truly practical projects are quietly building during this bear market. We have already seen some of these projects emerge on-chain.

As the profits from meme coins dwindle, attention will naturally shift to new narratives. AI, with its clear practicality, is very well-suited to become the next hotspot.

Many AI x Crypto projects are fairly distributed, echoing the aforementioned fair distribution narrative.

This is why I have researched and laid out my positions in this field during the calm weeks. There is no need to rush to establish a full position now - but I believe that if the market rises strongly again, this field will hold the greatest asymmetrical opportunities.

![The rapid development concept of technology that makes artificial intelligence a reality — stock photo])###