We have finally entered a bull market, but for most market participants who have actively built investment portfolios during the past few years in the bear market, this bull market is not too generous. Many young tokens have performed poorly. At the same time, older tokens such as $XLM, $XRP, $ADA, $DOT and $ATOM have shown impressive returns. So what happened?
Historically, newer Altcoins (less than two years since TGE launch) have outperformed older Altcoins across different time periods. However, in this bull market, this trend has changed significantly. For the first time, older projects such as $XLM, $XRP, $ADA, $DOT and $ATOM are leading the market, while newer tokens are lagging behind.
Let's analyze what this means, the potential reasons behind it, and what it portends for the future.
Trend Reversal
New Capital, Not Rotation
The broad-based rise of older Altcoins suggests that this trend is not driven by the usual capital rotation within the crypto ecosystem. Instead, it seems to be the result of new capital inflows, likely due to the return of retail investors to the market.
Retail Comeback — But in a Different Way
There are clear signs of rising retail interest, with Coinbase app rankings soaring and increased crypto-related YouTube viewership. However, contrary to the expectation of retail investors focusing on speculative memecoins, the inflow of funds appears to be directed towards the more mature projects from previous cycles. This may suggest that the current retail investor cohort is older, more risk-averse, or more familiar with the specific Altcoins from earlier bull markets.
Age and Familiarity as Factors
The older Altcoins are well-known projects from previous cycles. This suggests that the returning retail investors are likely in the 25-45 age range and have some familiarity with cryptocurrencies. They may not be as familiar with newer narratives like DePIN, RWA, AI, and instead opt for the familiar names.
Generational Dynamics
Gen Z participants may have discovered cryptocurrencies through TikTok or meme-driven content, and they often have less capital available for deployment. This can explain why, despite the market recovery, their memecoins have not seen a significant influx of funds.
Inflation
Another factor that may be contributing to the poor performance of new Altcoins is inflation. Logically, the older coins have a higher percentage of circulating supply, so new capital is not as diluted by new issuances.
Next, I want to focus on two key factors that have a significant impact on market performance in any bull market: inflation and retail participation metrics.
Inflation: The Invisible Killer of Crypto Gains
The sustained bull market has brought joy to the crypto market, but it has also highlighted a sobering reality: inflation is eroding your gains. For anyone chasing returns in this cycle, considering the inflationary dynamics of the assets you hold is crucial.
Let's break it down with some real-world examples:
In 2021, $SOL reached a price of $258 and a market cap of $75 billion. Today, it still trades at $258, but its market cap has inflated to $122 billion. What changed? The circulating supply. Inflation has quietly diluted the value of each token, requiring a larger market cap to maintain the same price.
Here are a few more examples:
$TAO: Market cap has surpassed $4.6 billion, but the price has not yet reached new highs.
$ENA: Market cap is close to its all-time high ($2.12 billion vs. $1.84 billion today), but the price has dropped from $1.49 to $1.2.
$ARB: March ATH market cap: $4.6 billion; Current: $3.8 billion. March price - $2.1; Current price - $1.
$SEI: ATH market cap: $2.8 billion; Recent: $2.25 billion. ATH price: $1.03; Current: $0.57.
These are just a few examples, but there are many more.
The Altcoin season may have arrived, but inflation is stealing the potential gains of many assets. As circulating supply increases, more capital is needed to maintain or increase token prices. Holding assets with aggressive inflationary plans means you are fighting an uphill battle, even in a bull market.
To address this issue, consider the following strategies:
Research token economics: Carefully examine inflation rates and token distribution plans before investing.
Diversify wisely: Focus on projects with supply caps or low inflation.
Evaluate real returns: Adjust your return expectations to account for inflation.
Inflation is not just a macroeconomic buzzword; it is the silent killer of economic growth.
