In the long run, Ethereum will not be able to hold on to this price.

Recently, Binance sold about $8 billion in crypto asset reserves, sparking widespread discussion in the market. The market generally believes that Binance's selling of crypto assets is just a routine operation aimed at accumulating profits. However, the truth does not seem to be that simple.

First, the cash out amounted to $8 billion, seven times more than the $1.1 billion in February 2024. Such a large-scale asset sale may have two main reasons: one is to beautify financial statements, and the other is to distribute large-scale shareholder equity. The former may be a preparation for equity financing or equity transfer, and the latter may involve cashing out of major shareholders.

Secondly, after the reduction, Binance's BTC holdings decreased from 46,896 to 2,747, a decrease of 94.1%; ETH holdings dropped sharply from 216,313 to 175, a decrease of 99.9%. The liquidation of ballast assets shows that Binance is pessimistic about the future market.

It is worth noting that Binance's large-scale reduction of holdings mainly occurred in January, which also provides a reasonable explanation for the market's flash crash in early February. However, news always serves the layout of capital. In such a sluggish market environment, the intention behind the hype of the negative news of Binance's "runaway" is self-evident. Interestingly, the ETH that was liquidated by Binance in January was heavily bought by US stock ETFs in early February.

Over the past year or so, Bitcoin's rise has been mainly due to its rise as a new medium of value storage, while Solana's popularity has been driven by the continued promotion of PVP funds. Although the two have different participating groups, they have one thing in common: the rise is mainly driven by funds, not technological innovation. This has led to the poor performance of Ethereum and altcoins that rely on fundamentals in this bull market. However, the speed of technological innovation is difficult to predict, just like before the birth of DeepSeek, almost no one in the market believed that China could develop a large model with performance close to ChatGPT but at a much lower cost. Therefore, although we cannot predict when the blockchain 0-1 breakthrough will occur, it is still a wise choice to buy at a relatively low point and hold for a long time.

In the plunge on February 3, the ETH/BTC exchange rate once hit 0.0237, hitting a new low in nearly five years, and the price almost returned to the level before the bull market started in 2020. If calculated from September 1, 2022, ETH/BTC has fallen by 73% so far. This level of decline has only occurred in 2018-2019 in history. But after this decline, it will be the mid-term bottom.

Although there are some minor flaws in the L2 distribution system, and the Ethereum Foundation's performance is also considered not to be active enough, these have not shaken Ethereum's core competitiveness. So far, ETH's fundamentals remain stable and improving.

Since November 2023, the TVL (total value locked) of the Ethereum network has maintained a steady growth regardless of ETH price fluctuations. Even during the crash from January 31 to February 3, the TVL of the Ethereum network did not show a significant decline. This shows that the long-term demand growth of the Ethereum network (without any subsidies) still exists, and the current downturn is mainly due to insufficient total industry demand.

Although the transaction fees of Layer 2 have dropped by 10 to 100 times after the Cancun upgrade, and the network fees created by Ethereum per TVL have dropped significantly month-on-month, the transaction volume created per TVL (including L2) has shown explosive growth. This shows that the network value created per TVL has increased significantly after the Cancun upgrade. In short, without sacrificing decentralization, cost reduction and efficiency improvement must be the core elements to maintain the competitiveness of the public chain. In addition, historically, a large number of innovations have started with cost reduction and efficiency improvement. Therefore, when evaluating the strategic significance of the Cancun upgrade and L2 expansion, we should focus on long-term development, rather than just focusing on the short-term tiny fluctuations in network fees. In other words, Ethereum's past large-scale infrastructure and cost reduction and efficiency improvement plans are all preparations for the arrival of the industry singularity.

Although Ethereum has not performed well in this round of bull market, it still outperforms 88% of the projects in the top 100 tokens by market value, which highlights the poor performance of altcoins as a whole. According to TradingView data, the market capitalization share of altcoins (excluding the top ten by market capitalization) fell from 9.8% on February 1 to 7.8% on February 3, setting a new record low in nearly three years. At present, the valuation of most altcoins is lower than 80% of the historical percentile, and the price is still below 90% of the historical percentile, which means that the valuation of most altcoins has returned to the level of Bitcoin at $15,500.

Currently, more and more people believe that only Bitcoin truly represents the ultimate value of blockchain, and most other blockchain projects may eventually become only memories of the times. However, according to historical experience, when a sector enters the stage of "killing valuation" from "killing logic", it usually means that the low point of the sector has appeared. Of course, the author always emphasizes that only about 5% of the altcoins have long-term value, and they are basically the leaders in various fields.

Historically, it usually takes a long time to rebuild confidence after each crash, and there may even be a second or third bottom in the middle. What we have to do is to build positions in batches at low points and wait for the arrival of a new cycle.

In the operation of altcoins, what type of trading opportunities investors focus on mainly depends on their personal risk preferences and profit expectations. For prudent investors, I think the platform coins of the top exchanges still have a certain safety margin. After all, the current valuation and growth are still very good. ETH, which is relatively lagging behind in this round of rise, can also be considered. After all, the lifting of ETH pledge ban and the launch of hybrid crypto ETFs can still bring a lot of incremental growth.