Venture capitalists who prioritize profits over the long term can negatively impact the stability and pricing of newly introduced cryptocurrencies.
According to well-known crypto analyst Route 2 FI, posted on April 22 in their Substack, venture capitalists (VCs) introduce considerable selling pressure when they invest in altcoins, which can negatively impact the token’s price trend over the long term. In simpler terms, although VC investments inject new funds for altcoin launches, these actions may ultimately lead to a decrease in the token’s value due to increased selling from the VCs.
“Permissionless token listing and money-hungry VCs are bad for the individual token long term. Every year 100 new tokens launch. Diluting existing ones. It’s now April 2024, and inflows into altcoins seem way more selective and not enough to offset big unlocks.”
One problem with many token launches today is their sky-high initial fully diluted valuations (FDV), which offer generous airdrops to early backers but feature extensive unlocking timelines for initial Venture Capital investors. Consequently, the price of most newly issued tokens is likely to drop based on Route 2 FI’s analysis.
“I think most new VC scam coins (high FDV coins) eventually will dump hard AF. And that you can use this to your advantage in pair trading or in situations where you want to hedge.”
At the current moment, the combined value of all altcoins, without considering Bitcoin (BTC), amounted to $1.05 trillion based on TradingView’s data. This represents a significant increase of 38% from the beginning of 2024 when its market capitalization was $760 billion.
A notable concern regarding massive unlocks in large crypto investments is the insufficient interest from crypto investors. This interest fall short in balancing out the significant surge in a coin’s available supply and the resulting selling pressure, as expressed by the anonymous expert.
“At some point, the supply will outnumber the demand and we will start spiraling downwards due to massive inflation. Early buyers will get trapped, which leads to bearish sentiment among the community, reduced TVL in the protocol, devs (if any) leaving for greener fields, and team members quitting.”
Is 2024 the end of crypto altseason?
In past market trends, altcoins often experience price surges following significant Bitcoin price increases, as investors shift their earnings from Bitcoin sales towards other cryptocurrencies.
Yet, boasting over 300 promising projects, insufficient market liquidity hinders a unified surge among top altcoins. This scenario might signal the demise of the prevailing altcoin trend boom.
“We hear a lot about altseason, but this time around I think things will be different… But ask yourself who is going to buy all these tokens. Unless institutions or retail are coming in masses, it will just be a forever PvP fight.”
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2024-04-23 15:47