This Is Why Altcoin Investors Struggle Despite Bitcoin, Ether Sitting Near Yearly Highs

Cryptocurrency giants such as SOL, AVAX, APT, SUI have seen corrections of 40% to 70% in the past months, which has suppressed altcoin sentiment. BTC and ETH are down only 15% from their yearly highs.

Markus Thielen stated that venture funds are under pressure to sell tokens to make a profit on the investments they have made in the past years.

The lack of capital inflow into crypto markets “has particularly bad consequences for upcoming major unlocks as well as newly launched tokens.” [tokens] and airdrop programs,” said Anagram partner David Shuttleworth.

The cryptocurrency market, at least for those invested in the two largest digital assets, is undergoing a healthy period of consolidation after a massive rally from October to March.

But for those holding smaller cryptocurrencies, this is a brutal correction where sentiment in crypto social media circles resembles bear market despair.

While Bitcoin {{BTC}} and Ethereum’s ether {{ETH}} are just 15% off their yearly highs, some cryptocurrency giants like solana {{SOL}} and avalanche {{AVAX}} are up 40% off their yearly highs. to 50% decrease. While reaching March peaks, tier 1 rivals sui {{SUI}} and aptos {{APT}} cratered 60% to 70% of the time.

Good advice for pure ultra long term investors, but I run both trading and venture books

I believe the cycle is over for 99% of altcoins.

Hold what makes sense to hold for multi-year/decadal investments

— Andrew Kang (@Rewkang) June 21, 2024

Selling pressure from venture funds with the expansion of supply token locks, a lack of new entrants into crypto, and seasonal trends have all contributed to the weakness in altcoins, a term used to describe cryptocurrencies beyond the largest cryptocurrencies such as bitcoin and ether.

high dilution

Many altcoins face a constantly decreasing supply of tokens through unlocks and distributions planned for years to come. This is because most tokens are locked up, purchased by early investors, or allocated for ecosystem developments and donations.

For example, {{ARB}}, the token of the Ethereum layer-2 network Arbitrum, has been approaching its all-time low price since last September, even though its market cap has increased from $1 billion to $2.5 billion due to a massive increase in its supply.

Another example is solana, whose supply increases by 75,000 tokens every day and is worth about $10 million at current prices.

“Unlike stocks, which receive constant passive bidding due to ETF inflows and bond buybacks, crypto and especially altcoins are experiencing the opposite; a constant stream of selling pressure,” said Quinn Thomson, founder of crypto hedge fund Lekker Capital. mail

The story continues

A significant part of the selling pressure comes from venture capital funds that have profited from initial investments in projects launched in recent years.

“The market has turned into a steep bear market as venture capital funds invested $13 billion in the first quarter of 2022,” Markus Thielen, founder of 10x Research, said in a report earlier this week. “As artificial intelligence (AI) becomes a hotter topic, these funds are now under pressure from their investors to return capital.”

When the market’s appetite for smaller, more speculative crypto assets wanes and trading volumes decline (as they have in the last few months), there is not enough demand to absorb this supply shock.

Read more: Crypto Markets Under Pressure With $2B Altcoin Token Unlocked and $11B Bitcoin Distribution Coming

Lack of fresh entry

Liquidity inflows into crypto markets have also stopped and even reversed in recent weeks; This is evidenced by the market value of stablecoins, which are often used as intermediaries in crypto trading.

The combined market cap of the four largest stablecoins (Tether’s USDT, Circle’s USDC, First Digital’s FDUSD, and Maker’s DAI) is down from $30 billion at the beginning of this year, according to TradingView data. It has remained stable since April following the expansion.

Combined market cap of USDT, USDC, FDUSD and DAI (TradingView)

Anagram partner David Shuttleworth noted in an

“This has particularly bad implications for upcoming major unlocks as well as newly released tokens. [tokens] and airdrop programs,” Shuttleworth said.

The recently launched blockchain bridge Wormhole {{W}}, yield-generating synthetic dollar protocol Ethena {{ENA}}, and layer-2 network Starknet {{STRK}} tokens have all dropped in price by approximately 60% to 70% from their respective highs. lived. and they will face billions of dollars worth of tokens being distributed in the coming years.

Seasonal trends for smaller tokens are also bearish; June is generally a bearish month for altcoins.

TradingView data shows that the aggregate market cap for crypto assets, excluding BTC and ETH, as determined by the TOTAL.3 metric, has seen a decline every June for the past six years.

This month is on its way to being an exception; TOTAL.3 is down 11% year to date.