TL;DR
- The constant daily selling pressure in the crypto market is approximately $150m-$200m.
- Token dilution in the crypto market is comparable to inflation in the traditional financial system.
- The lack of new liquidity coupled with high selling pressure prevents a bull market for altcoins.
The cryptocurrency market is currently facing huge selling pressure, estimated at around $150 to $200 million daily.
This situation is negatively affecting altcoins, with constant pressure decreasing their value.
Miles Deutscher compares this dilution of tokens to inflation in the traditional economy: if the government prints more money, the purchasing power of the currency decreases.
A MAJOR fundamental flaw in crypto is starting to emerge.
It's the #1 reason why altcoins are underperforming this cycle.
And currently, there seems to be no fix.
I just dug through all the data (what I found was shocking).
🧵: How altcoin dispersion is killing crypto.👇
— Miles Deutscher (@milesdeutscher) June 18, 2024
Likewise, if more tokens are released into the crypto market, their purchasing power relative to other currencies, such as the US dollar, is reduced.
This phenomenon has intensified due to the high volume of new token launches and the low Total Market Value (FDV) and high circulation mechanics that characterize many of these new projects.
This not only causes a high dispersion of altcoins, but also a constant supply pressure that makes it difficult to value these assets.
During the market boom in 2021, the large number of new daily releases was sustained by the continuous influx of new liquidity, Dune data shows us this phenomenon.
However, in the current context, this new liquidity is insufficient.
We are, therefore, in a situation with two main problems: an insufficient entry of new liquidity into the market and an inordinate amount of dilution and selling pressure derived from the release of new tokens.
How the Crypto Market Situation Can Improve
For the cryptocurrency market to recover and altcoins to return to positive performance, it is essential that more liquid funds enter the ecosystem.
Currently, there is a glut of venture capital (VC) funds, creating a distortion in the market.
This concentration in the private market is one of the most serious and damaging problems in crypto, especially compared to other markets such as stocks and real estate.
The perception that the market is skewed in favor of VCs discourages retail investors, who feel they cannot win.
This perception has led to the dominance of memes in the crypto market this year, as it is the only segment where retail investors feel they have a real chance of success.
To compound the situation, most price discovery opportunities for high FDV tokens are done in private markets, leaving retail investors without the ability to earn significant returns, like those achieved by VCs.
In 2021, investors could participate in token launches and actually achieve profits of up to 100 times their investment, something that currently seems unattainable.
The recovery of the crypto market largely depends on the influx of more liquid liquidity and reducing dependence on venture capital funds.
Only then will retail investors trust the market again and actively participate, which could lead to a new bullish cycle for altcoins.
