During the previous bull market cycle, when major coins like Bitcoin increased in price, the increase in Altcoin prices would also begin shortly after. But in this cycle, everything has changed. Even if Bitcoin surges in price, an increase in Altcoin prices will not occur.
Odaily Planet Daily will analyze the impact of ETF spot and Altcoin oversupply.
Spot ETFs attract new Capital to the market during this cycle
The emergence of Bitcoin spot ETFs may be changing market structure. In previous bull market cycles, the path for funds to add to the market was: first into major cryptocurrencies like Bitcoin and Ethereum, then value would flood into Altcoins.
But this bull market could be different. For new players, instead of investing in cryptocurrencies with high price volatility, they will choose to invest in crypto ETFs in a more familiar and traditional way, and this Capital will naturally flow. into the relatively more stable Bitcoin spot ETF.
Amount of BTC held by Bitcoin ETF spot account(Source: CryptoQuant)
This change will make it more difficult for new Capital to flow into Altcoins, making it difficult for their prices to increase. As Odaily author JK said in "Data Extraction: ETFs are Delaying the Real Bull Market": "The issuance of Bitcoin and Ethereum ETFs not only attracts new Capital but also influences investor behavior." investment and future drain on market liquidation ; many retail investors and investors unfamiliar with cryptocurrencies will likely invest in ETFs early in the market cycle. price increases, and new projects will face a situation where there are no users and no audience to validate the technical story."
Although crypto players are also looking forward to institutions launching spot ETFs for Altcoins, it is clear that this goal remains difficult to achieve this cycle. Even BitMEX founder Arthur Hayes was optimistic, predicting that the Dogecoin ETF could be launched by the end of this cycle.
Altcoins face oversupply and face constant selling pressure
The growing lack of Capital is just one aspect. Another influencing factor is: the large amount of newly unlocked Altcoins and the selling pressure of Venture Capital, leading to the supply of Altcoins on the market far exceeding demand.
Stablecoin market Capital (source: coinecko)
Since mid-April, the market value of stablecoins has slowed down, and only increased by about $500 million in two months, which indirectly demonstrates the growth of new Capital entering the cryptocurrency industry. Deaths have also slowed in recent months. However, according to data from TokenUnlocks, $800 million worth of Token will be unlocked and flow into the market this June, including major projects such as DYDX, Sui, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT) and Starknet (STRK).
This sudden influx of newly unlocked Token will certainly create turbulence in the market , especially as incremental funds grow slowly and existing funds cannot absorb such a large Token supply. .
Additionally, some early VCs often make 10x profits on Altcoins. Due to the need to take 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 Altcoins is expected to completely decline.
As Quinn Thompson, founder of crypto hedge fund Lekker Capital, said , over the next one to two years, about $3 billion in monthly market funds will be needed to deal with Altcoin supply inflation. While some Altcoins may still do well, identifying these Token will be more difficult than in previous cycles.
In general, crypto investors should not expect too much from the Altcoin market in the future. This altcoin season may be absent.
