Author: Thomas Carreras Source: DLNews Translation: Shan Ouba, Jinse Finance
Lekker Capital told DL News that the crypto market may be about to face difficult times. Reduced demand, increased supply, and changes in market structure are particularly severe for Altcoin. The crypto market is on the verge of a severe liquidation wave.
According to Quinn Thompson, founder of crypto hedge fund Lekker Capital:
“Expect most Altcoin to be wiped out,” Thompson said. “The market seems to have lost its ability to rally, even among the majors, while leverage and open interest remain high.”
Thompson told DL News that the introduction of a Bitcoin spot exchange-traded fund (ETF) has changed the structure of the crypto market.
In previous bull runs, small-cap cryptocurrencies also benefited as traders became bolder after money flowed into Bitcoin and Ethereum.
But today, investors who gain exposure to Bitcoin through ETFs find it difficult to easily buy Altcoin other than Bitcoin in their brokerage accounts.
“Quite simply, there is a lack of demand to support Altcoin supply growth of around $3 billion per month over the next one to two years,” Thompson told DL News.
“Just like in the stock market some stocks do well and some do poorly, the same is true here, the differentiation will continue to increase, not decrease,” he added.
More supply, less demand
Thompson noted that ETF inflows are declining and venture capital funds are raising capital by selling their cryptocurrency holdings. Stablecoin supply — sometimes used by traders as a measure of demand — has also peaked.
“Despite multiple attempts to break out above all-time highs, Bitcoin has been unable to gather enough strength,” Thompson said.
The reduction in demand could particularly affect Altcoin, Thompson said, as many crypto projects will unlock their token supplies.
In other words, project teams and their investors will increasingly have access to token reserves that they have been unable to sell so far. And new buyers are now unlikely to step in to cushion the blow.
“As we head into an already low-volume summer, significant token supply unlocking and selling pressure from venture capitalists will likely act as strong headwinds that most tokens will struggle to deal with,” Thompson said.
“There’s no panic yet,” he added. “But I expect that will change.”
