Has the Market Stopped Rewarding Diamond Hands?

Once upon a time, Zhao Changpeng's saying "If you can't hodl, you won't get rich" was regarded as the golden rule of investment in the crypto world.

Once upon a time, Zhao Changpeng's words, "If you can't hodl, you won't get rich," were regarded as the golden rule of investment in the crypto world. As the saying goes, the essence of crypto investment lies in buying, holding firmly, and then cashing out at a profit to gain substantial returns—a philosophy that made HODL very popular in the community.

Some investment institutions gained significant returns through in-depth research and betting, such as the last cycle where top-tier funds achieved hundreds or even thousands of times returns on MATIC and AAVE. Various legendary wealth stories led retail investors to generally believe in the powerful effect of diamond hands. However, while this investment philosophy was somewhat effective in the last cycle, it is no longer revered by the market in this cycle, especially among players holding a lot of altcoins.

Under a four-year cycle, the market structure has undergone considerable changes. If one cannot adjust their style in a timely manner, they often face the risk of standing guard at the peak. Has the market really stopped rewarding diamond hands?

1. Memes and AI Take Center Stage, General Bull Market No Longer

In past cycles of the crypto market, a general bull market often followed six months after Bitcoin's halving. Market funds would accumulate in Bitcoin, then spread to Ethereum after reaching a certain level, followed by mainstream altcoins, and finally small-cap altcoins and meme coins would go wild, marking the end of a typical bull market cycle.

This cycle, however, saw the first wave of upward momentum brought forward by the favorable Bitcoin spot ETF news. After Bitcoin enjoyed its moment in the spotlight, the crypto market remained quiet for a long time. The long-awaited rise in Q4 2024 turned out to be quite brief.

If you embraced popular assets like Bitcoin, SOL, and Dogecoin early in this cycle, the returns for diamond hands have been quite substantial. But if the altcoins you chose were not favored by the market, such as those in staking, inscriptions, gaming, or NFTs, the returns you might see could be "tragically poor."

Recently, Binance's launch of new coins, often peaking immediately upon listing, has led to a continuous decline. Projects with slightly better quality and popularity might experience a brief period of increase, while those without heat or utility that continue to unlock have seen buying pressure weaken and set new historical lows. If diamond hands unfortunately chose obscure sectors and coins, holding on without selling could lead to significant losses.

Moreover, compared to the relatively hot DeFi and NFT sectors in the last cycle, this cycle has not seen any truly breakout innovations that could compete with them. Market funds have been stagnant for a long time, concentrated in Bitcoin, memes, and AI concept coins.

The chart below clearly shows that Bitcoin's market cap share saw significant declines in both 2017 and 2021, due to the general rise of altcoins. By 2023, Bitcoin's market cap share began to climb steadily, rising from 38% to even over 60% at one point. In contrast, Ethereum has been troubled by multiple factors, with its market cap share starting to decline since the beginning of 2023.

Historically, it is rare for Bitcoin's market cap share to rise without a corresponding general bull market for altcoins.

Now, the market seems to only reward diamond hands holding a very small number of coins like Bitcoin.

2. Mainstream Altcoins Underperform Expectations

The difficulty of the altcoin market in this cycle is incomparable to the last cycle. Taking the last cycle's L1 as an example, based on the lowest point after listing on Binance, DOT achieved a maximum return of over 20 times, NEAR nearly 40 times, AVAX over 40 times, SOL over 250 times, and UNI in the DeFi sector also returned over 20 times. The wealth effect in the industry was very significant.

It is worth mentioning that the aforementioned tokens with substantial returns all fell to their bottom ranges six months to a year after reaching historical highs.

In this cycle's infrastructure L1, aside from SOL/SUI performing decently, the rest have underperformed. In L2, OP recorded a maximum return of 10 times, while ARB reached a maximum of 3 times. Both fell to their bottom ranges within five months after hitting new highs, with ARB even dropping from a historical high of $2.42 to a historical low of $0.34. Stablecoins like USUAL/ENA recorded decent returns, but from their lows, they also fell below 10 times.

Some projects that were highly sought after by VC capital have performed poorly, with EIGEN achieving a maximum return of 2 times, now hitting historical lows. ETHFI and RENZO, which were re-staked, began a downward trend immediately after