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

The
cryptocurrency
market
is
undergoing
a
healthy
consolidation
after
a
massive
run-up
from
October
to
March
–
at
least
for
those
who
invested
in
the
two
largest
digital
assets.

For
those
who
hold
smaller
cryptocurrencies,
though,
this
is
a
brutal
correction,
with
sentiment
in
crypto
social
media
circles
resembling
bear
market
despair.

While
bitcoin

(BTC)
and
Ethereum’s
ether

(ETH)
are
only
15%
below
their
yearly
highs,
several
crypto
majors
like
solana

(SOL)
and
avalanche

(AVAX)
are
down
40%
to
50%
from
their
March
peaks,
while
layer-1
challengers
sui

(SUI)
and
aptos

(APT)
have
cratered
60%
to
70%.

Selling
pressure
from
venture
funds
with
broadening
supply
token
unlocks,
lack
of
fresh
inflows
to
crypto
and
seasonal
trends
all
contributed
to
weakness
in
altcoins,
a
term
used
to
describe
cryptocurrencies
beyond
the
biggest
ones
like
bitcoin
and
ether.

Many
altcoins
experience
a
constantly
diluting
supply
of
tokens
via
unlocks
and
distributions
scheduled
for
years
ahead.
This
is
because
most
of
the
tokens
are
locked
up,
bought
by
early
investors
or
earmarked
for
ecosystem
developments
and
grants.

For
example,
Ethereum
layer-2
network
Arbitrum’s
token

(ARB)
is
nearing
its
all-time
low
price
from
last
September,
even
though
its
market
capitalization
has
risen
to
$2.5
billion
from
$1
billion
because
of
a
massive
increase
in
its
supply.

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

“Unlike
equities
which
have
a
constant
passive
bid
from
ETF
inflows
and
bond
buybacks,
crypto,
and
in
particular
altcoins,
have
the
opposite
–
a
constant
stream
of
sell
pressure,”
Quinn
Thomson,
founder
of
crypto
hedge
fund
Lekker
Capital,

noted
in
an
X
post.

A
significant
portion
of
the
selling
pressure
comes
from
venture
capital
funds
realizing
profits
on
their
early
investments
in
projects
launched
over
the
past
years.

“Venture
capital
funds
invested
$13
billion
in
Q1
2022,
while
the
market
turned
into
a
steep
bear
market,”
Markus
Thielen,
founder
of
10x
Research,
said
in
a
report
earlier
this
week.
“Those
funds
are
now
under
pressure
from
their
investors
to
return
capital
as
artificial
intelligence
(AI)
has
become
a
hotter
theme.”

When
the
market’s
appetite
for
the
smaller,
more
speculative
crypto
assets
is
dwindling
and
trading
volumes
are
falling
–
like
in
the
past
few
months
–
there’s
not
enough
demand
to
absorb
this
supply
shock.

Read
more:



Crypto
Markets
Under
Pressure
as
$2B
Worth
of
Altcoin
Token
Unlocks
and
$11B
Bitcoin
Distribution
Loom

Liquidity
inflows
to
crypto
markets
have
also
stalled
or
even
reversed
over
the
past
weeks,
shown
by
the
market
value
of
stablecoins,
which
are
mostly
used
as
an
intermediary
for
crypto
trading.

The
combined
market
capitalization
of
the
four
largest
stablecoins
–
Tether’s
USDT,
Circle’s
USDC,
First
Digital’s
FDUSD
and
Maker’s
DAI
–
has
been
flat
since
April
after
a
$30
billion
expansion
earlier
this
year,
per
TradingView
data.

Stablecoin
balances
on
exchanges
–
which
translates
to
dry
powder
for
traders
and
investors
–
decreased
$4
billion
to
the
lowest
level
since
February,
David
Shuttleworth,
partner
at
Anagram,
pointed
out
in
an

X
post
citing
Nansen
data.

“This
has
particularly
bad
implications
for
tokens
with
large
upcoming
unlocks
as
well
as
new
[tokens]
and
airdrop
programs,”
Shuttleworth
said.

Recently
launched
tokens
of
blockchain
bridge
Wormhole
{{W}},
yield-bearing
synthetic
dollar
protocol
Ethena
{{ENA}}
and
layer-2
network
Starknet

(STRK)
all
plummeted
roughly
60%
to
70%
in
price
from
their
respective
highs
and
will
face
billions
of
dollars
worth
of
tokens
being
distributed
in
the
coming
years.

Seasonal
trends
have
been
also
bearish
for
smaller
tokens,
with
June
usually
being
a
down
month
for
altcoins.

TradingView
data
shows
that
the
aggregated
market
cap
for
crypto
assets
excluding
BTC
and
ETH,
captured
by

TOTAL.3
metric,
saw
a
decline
in
every
June
during
the
past
six
years.

This
month
is
on
track
to
be
no
exception,
with
TOTAL.3
down
11%
to
date.