7 Trading Tips in FOMO Market Conditions

1. Exercise caution with rapid price increases

Recently, the altcoin market has shown a rapid upward trend, starting from large-cap coins like Chainlink and Solana, quickly spreading to low-cap and meme coins. This rapid increase usually occurs in the late stages of a bull market, reflecting the desperate sentiment in the market, as if missing out now means losing the opportunity forever.

It is worth noting that some old tokens like MBL and FIL have also joined the upward trend. This situation is similar to the market conditions from the end of 2019 to the beginning of 2020, prior to the COVID-19 pandemic, when it was considered a bull market trap. We still need to remain vigilant about whether the current market sentiment is overly optimistic.

2. Ethereum's performance lags behind

Compared to other mainstream cryptocurrencies, Ethereum's performance has been disappointing. Data from October 1 to November 14, 2023, shows that Ethereum only rose by 18%, far below Bitcoin's 30% increase, not to mention Solana's astonishing 120% surge.

This poor performance may be related to Ethereum's staking mechanism. After the Shanghai upgrade, more ETH has been locked in staking, reducing market circulation. However, this has not driven prices up as expected; instead, it may lead investors to exchange ETH for other altcoins that are rising, creating ongoing selling pressure.

3. Be cautious of VC tokens like Solana

As the market warms up, some venture capital firms are starting to refocus on the cryptocurrency market. Solana, as a typical VC token, has most of its token allocation given to internal investors. It is worth noting that the SOL tokens held by FTX/Alameda will gradually be unlocked before 2028, which may have an impact on the future market.

4. Pay attention to token sell-off trends

In the current bullish market, various parties are seizing the opportunity to sell assets, including project development teams, early investors, and some exchanges. Although selling at the beginning of a bull market may be a mistake, it is a reasonable choice for certain projects in urgent need of funds. Investors need to be cautious of becoming the exit liquidity for others, especially for development teams that may be gradually exiting the project.

5. Stablecoin Inflow Trend

Recently, there have been reports of a large inflow of stablecoins into the market. Data shows that approximately $3 billion in stablecoins has indeed flowed in, but this figure is still relatively small compared to the outflow of market funds last year. This may primarily stem from existing cryptocurrency enthusiasts rather than new market entrants. A true bull market requires more inflow of funds from outside the crypto market.

6. Pay attention to 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 advise clients to allocate 1-5% of their overall investment portfolio to cryptocurrency investments, while also emphasizing the high volatility of Bitcoin. This means that the influx of funds from the traditional financial sector may not be as rapid as the market expects.

The approval of the ETF may become a "sell the news" event, similar to the market reactions after certain significant events in the past. Before the official launch of the ETF, the market may experience a period of speculative rise.

7. The market outlook remains unclear

Currently, there are differences in the crypto community regarding whether this round of price increase can be sustained. The market performance is similar to the first half of 2023, with alternating rises and falls and significant fluctuations in sentiment. The recent large fluctuations in the altcoin market have led to the liquidation of long positions, reflecting that market liquidity is still insufficient and some investors remain shortsighted.

An ideal bull market is usually characterized by slow and steady rises rather than dramatic fluctuations. Currently, perpetual contract trading volume still dominates, which means the market may continue to experience significant volatility. Investors need to remain cautious and closely monitor market changes.