Original Content | Odaily Planet Daily
Author | Golem
In past bull market cycles, when mainstream coins like Bitcoin rose, the altcoin market would also see an uptrend shortly after. However, in this current cycle, times have changed, and even though Bitcoin has surged significantly, the altcoin uptrend may not follow suit.
Odaily Planet Daily will analyze the impact of spot ETFs and the oversupply of altcoins.
Spot ETFs drawing away new funds from this cycle
The emergence of Bitcoin spot ETFs may be altering the market structure. During past bull markets, the path for incremental funds to enter was to first flow into major cryptocurrencies like Bitcoin and Ethereum, and then overflow into altcoins.
But this bull market cycle may be different. For new players entering the market, rather than investing in highly volatile cryptocurrencies, they may opt for a more familiar and traditional way to invest in crypto ETFs, naturally directing funds towards the relatively stable Bitcoin spot ETF.
This shift may make it difficult for new funds to flow into altcoins, making it harder for the latter to appreciate. As mentioned by Odaily Planet Daily author jk in “Data Analysis: ETFs are Delaying the Real Bull Market,” “The issuance of Bitcoin and Ethereum ETFs not only brings in new funds but also affects investor behavior, drawing liquidity away from the future market; many retail investors and traders who are not familiar with cryptocurrencies may directly invest in ETFs at the beginning of the bull market, leaving new projects facing an audience without users or recognized technological narratives.”
Although crypto enthusiasts are hopeful that institutions will launch spot ETFs for altcoins, it is evident that achieving this goal in this current cycle may be challenging. Even BitMEX founder Arthur Hayes is at most optimistic in predicting that a Dogecoin ETF may be launched at the end of this cycle.
Altcoins facing oversupply and continuous selling pressure
The scarcity of incremental funds is just one aspect, and another influencing factor is the large unlocking of new altcoins and the selling pressure from VCs, leading to an oversupply of altcoins in the market.
Starting from mid-April, the growth in stablecoin market value has slowed down, increasing by only around $500 million in two months, indirectly indicating that the growth of new funds entering the crypto industry has also slowed down. However, according to TokenUnlocks data, in June alone, tokens worth $800 million will be unlocked and flow into the market, including mainstream projects like dYdX, SUI, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT), and Starknet (STRK).
The sudden influx of these new unlocked tokens is bound to cause ripples in the market, especially when incremental fund growth is slow, and existing funds cannot digest such a large token supply.
Additionally, some early VCs have seen returns of over 10 times on altcoins, and out of profit-taking needs or concerns about the future market, they will continue to sell in the market, ultimately causing a domino effect, leading altcoin prices to continue to decline.
As mentioned by Quinn Thompson, founder of crypto hedge fund Lekker Capital, in the next one to two years, approximately $30 billion in market funds will be needed each month to cope with the supply inflation of altcoins. Although some altcoins may still perform well, identifying these tokens will be more challenging than in previous cycles.
Overall, to all crypto investors, do not have overly high expectations for the future altcoin market. This alt season may be absent this time around.