Investors are closely watching when the altcoin season will arrive. If incremental funds continue to favor spot ETFs and existing funds find it difficult to support the unlocking of altcoins, this cycle may be different from the past…
(Previous context:
Arthur Hayes: Global central banks lowering interest rates early, go long on Bitcoin, altcoin season is also near
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(Background:
Former Bloomberg analyst: “Altcoin season” expected to arrive in a few weeks, as long as these two conditions are met…
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In past bull market cycles, after mainstream coins like Bitcoin have risen, the altcoin rally usually follows shortly after. However, in this cycle, times have changed, and even though Bitcoin has already surged significantly, the altcoin rally has not materialized. Odaily Star Daily will analyze the impact of spot ETFs and the oversupply of altcoins.
Spot ETFs are diverting new funds from entering this cycle
The emergence of Bitcoin spot ETFs may be changing the market structure. During past bull markets, the path for new funds entering the market 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, instead of investing in highly volatile cryptocurrencies, they may opt for more familiar and traditional ways to invest in crypto ETFs. As a result, these funds naturally flow into the more stable Bitcoin spot ETF.
Number of BTC held in Bitcoin spot ETF accounts (source: CryptoQuant)
This shift will make it difficult for new funds to flow into altcoins, making it harder for the latter to appreciate. As mentioned in “Data Extraction: ETFs are delaying the real bull market”:
Although crypto players are also hoping for institutions to launch spot ETFs for altcoins, it is clear that achieving this goal in this cycle may be challenging. Even BitMEX founder Arthur Hayes is cautiously optimistic at best, suggesting that a Dogecoin ETF may be launched at the end of this cycle.
Altcoins are facing continuous selling pressure due to oversupply
The scarcity of incremental funds is just one aspect, 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.
Total market value of stablecoins (source: coingecko)
Starting from mid-April, the growth in stablecoin market value has slowed down, increasing by only about $500 million over two months, indicating a slowdown in new fund inflows into the crypto industry over the past few months. However, according to TokenUnlocks data, tokens worth $800 million will be unlocked and enter the market in June alone, including mainstream projects such as dYdX, SUI, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT), and Starknet (STRK).
The sudden influx of these newly unlocked tokens is bound to cause waves in the market, especially when incremental funds are growing slowly and existing funds cannot absorb such a large token supply.
Additionally, some early VCs have seen returns on altcoins multiply by over 10 times, and out of profit-taking needs or concerns about the future market, they will continue to sell in the market, ultimately causing a chain reaction, and the price of altcoins is destined to decline.
As Quinn Thompson, founder of crypto hedge fund Lekker Capital, said, in the next one to two years, about $3 billion in market capital is needed each month to cope with the supply inflation of altcoins. While some altcoins may still perform well, identifying these tokens will be more challenging than in past cycles.
Overall, to all crypto investors, do not overly expect the future altcoin market. This altcoin season may be absent this time.
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