Lately, the signs have been pointing to elevated risks, and while SPX has shown resilience, no asset is immune to shifting trends. Let's take a step back, carefully assess the landscape, and ensure we're approaching this with clear eyes.

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Are you managing risk effectively?

Many traders, especially those new to the barbell strategy, end up with too much risk on the high-volatility side of their portfolios. Instead of balancing between safer assets and higher-risk plays, they concentrate heavily on memes, often with minimal allocation to majors.

If more than 10%-20% of your portfolio is in a single meme coin, that's a sizable risk. With two years of the bull market already behind us, it's wise to think about preserving capital rather than doubling down without caution, especially when the risk-reward opportunity isn't as attractive as it once appeared.

In this report, we'll cover:

• Broader market concerns - Why liquidity fragmentation is capping upside potential.
• Actionable insights - What you can do to protect capital.
• Cryptonary's take - Our thoughts on SPX and where we stand.

Disclaimer: This is not financial or investment advice. You are responsible for your own capital decisions.

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Broader market context

Looking at the bigger picture, the market is grappling with dispersion and liquidity fragmentation- over 30 million unique coins, with thousands more launching daily (no thanks to Pump.fun). This saturation disperses liquidity and focus, ultimately limiting how high valuations can realistically go. The original framework for meme assets running to $10b+ was laid out based on previous cycle coins like SHIBA and DOGE, but something we didn't account for was the short attention span and large amount of new coin launches. We've now seen these patterns, where memes stall and fail to run past $5b:

• PNUT soared on election hype but stalled at $2.5B.
• POPCAT was once a powerhouse chart in crypto, yet it couldn't hold above $2B.
• Most coins struggle to surpass a $3B-$5B ceiling, then bleed out.

These examples show the risk of assuming any coin will keep defying gravity. One trader made $12M in $TRUMP, but greed led him to buy more on the way down, losing $9M of his original capital. This scenario isn't isolated- it's a reminder that taking profits is crucial in fast-moving markets.

Time and again, coins can drop 50% or more, then another 60%-80% after that. With BTC already 5x from its lows, expecting every alt to return to its peak might be more hope than strategy at this stage of the cycle.

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Why this matters for SPX

Recently, SPX lost key support after hitting $1.60, dipping below $1 into a precarious range. We initially raised concern (early January) and publicly announced it could be a wise move to take profit near the highs. Since that call, SPX fell to $0.60 this week.

Data from on-chain sources shows capital rotation out of SPX:

• We have found 56 addresses sold 100,000+ SPX in the past week.
• 3 addresses unloaded more than 1 million tokens. (1, 2,3)

This mirrors patterns seen in WIF, PNUT, GOAT, GRIFFAIN, POPCAT, ai16z, and countless others. No matter how solid a community might be, a coin can still plunge 80% - 90%. Market conditions have the upper hand in many of these scenarios.

Even though SPX's meme power and community remain strong, the broader market conditions pose a bigger threat right now. Plus, the upside for SPX seems capped between $2b and $5b, similar to other meme-based assets, so the risk-to-reward might not be as favourable as it once was.

Furthermore, the price action of SPX is not positive as well. SPX convincingly broke down the $1 level, which opened doors for further downside towards $0.56 and $0.2. The $0.56 remains the key level of support that price will need to hold above of. A break below $0.56, would potentially see SPX revisit $0.20. A declining volume on the asset usually suggests price moving lower as well.

 

Given all this, how do we navigate wisely?

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How to play this market: caution & capital preservation

We suggest focusing on capital preservation and waiting for better risk-reward entries. Opportunities will always come around, but only if you have funds to deploy when they do. If you haven't taken profits, it could be prudent to consider doing so. If you prefer to keep holding, just ensure your portfolio is balanced so you're not overexposed to the memecoin/altcoin sector.

Here's a cautionary tale to illustrate the point:

• A whale had $40M in gains across $ai16z and $ZEREBRO.
• Instead of locking in profits, they held firm.
• Within a week, their unrealized gains plummeted to $9M.
• In the end, they exited with a $2M loss despite once being up significantly.

This is a sobering example of how quickly fortunes can change when market conditions shift. We've seen time and again:

• New meme coins often face a ceiling on their market cap.
• SPX itself may not offer the same upside it once did (potentially limited to $2B-$5B).
• Key or large holders may move their profits out fast, leaving latecomers exposed.
• Markets can drop 80% - 90% when overall sentiment deteriorates.

So, remember to take profits where sensible, keep your risks in check, and hold onto capital for future opportunities.

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Cryptonary's take

We genuinely love SPX - the camaraderie, memes, and momentum are unmatched. Still, our mission is to keep holders updated on any emerging risks. No one wants to experience another dramatic drawdown, especially if it could have been mitigated by timely profit-taking.

While the meme and community remain robust, outside market forces can overshadow even the best projects. If you decide to hold, balance that decision with other positions. If you choose to exit, lock in those gains and keep capital ready for new opportunities.

For as long as civilization exists, markets will be around and present opportunities.

Cryptonary, OUT!