In the past bull market cycle, when mainstream currencies such as Bitcoin rose, the rise of Altcoin would also start soon. But in this cycle, times have changed, and even though Bitcoin has risen sharply, the rise in Altcoin prices has not come. Odaily Odaily will analyze the impact of spot ETFs and the oversupply of Altcoin.
Spot ETFs draw away new funds entering this cycle
The advent of Bitcoin spot ETFs may be changing the market structure. During past bull markets, incremental capital flowed first into major cryptocurrencies such as Bitcoin and Ethereum, followed by value spillover into Altcoin.
But this bull market may be different. For new players, instead of investing in highly volatile cryptocurrencies, it is better to invest in crypto ETFs in a more familiar and traditional way, and this part of the funds will naturally flow to the relatively more stable Bitcoin spot ETFs.
This shift will make it harder for new money to flow into Altcoin, making it harder for the latter to appreciate in value. As stated in "The Data: ETFs Are Delaying the Real Bull Market":
The issuance of Bitcoin and Ethereum ETFs will not only bring in new funds, but will also affect investor behavior and drain future liquidity from the market; many retail investors and investors who do not know much about cryptocurrencies will face the initial bull market , it is very possible to invest funds directly into ETFs, and new projects will face the embarrassing situation of no users and no audience who recognize the technical narrative.
Although crypto players are also looking forward to institutions launching spot ETFs for Altcoin, it is clear that it is still difficult to achieve this goal in this cycle. Even BitMEX founder Arthur Hayes was optimistic at best, predicting that a Dogecoin ETF could be launched by the end of this cycle.
Altcoin face oversupply and face continued selling pressure
The lack of incremental funds is only one aspect. Another influencing factor is: the large number of new Altcoin unlocked and the selling pressure of VCs, resulting in the market supply of Altcoin far exceeding demand.
The growth in the market value of stablecoins has been flattening since mid-April, with only an increase of about US$500 million in two months, which proves that the growth of new funds entering the crypto industry has also been flattening in the past few months. However, according to TokenUnlocks, $800 million worth of tokens were unlocked and flowed into the market in June alone, including dYdX, SUI, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT) and Starknet (STRK ) and other mainstream projects.
The sudden influx of these newly unlocked tokens is destined to make waves in the market, especially when incremental funds grow slowly and existing funds cannot absorb such a large supply of tokens.
In addition, some early VCs often earn more than 10 times the profit multiple on Altcoin. Out of the need to cut profits or concerns about the future market, they will inevitably continue to sell in the market, eventually causing a series of stampedes, and the price of Altcoin is destined to be only All the way down.
As Quinn Thompson, founder of crypto hedge fund Lekker Capital, said, in the next one to two years, approximately US$3 billion in market funds per month will be needed to cope with the supply inflation of Altcoin. While some Altcoin may still perform well, identifying these coins will be more challenging than in previous cycles.
Generally speaking, crypto investors, don’t expect too much about the Altcoin market in the future. This round of altcoin season may be absent.
