‘Crypto Winter’ Arrives Early For The Altcoin Market As Venture Capital, Founder Selloffs Mount

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As a researcher with a background in cryptocurrencies and blockchain technology, I have witnessed the ups and downs of the altcoin market over the past few years. The current trend is particularly concerning, as we are seeing an early “crypto winter” driven by a combination of factors, including token unlocks and selling pressure from correlation with major network tokens.

“The market for alternative cryptocurrencies is currently undergoing a premature ‘crypto winter,’ as some early backers and creators cash out their token holdings.”

Based on a recent Bloomberg analysis, the decrease in value can be linked to several reasons. Firstly, the release of tokens previously held by venture capitalists (VCs) and crypto project founders. Additionally, the selling pressure has intensified due to the connection between altcoins’ values and those of major network tokens.

Altcoin Market Hit By Token Unlock Wave

This year, as the cryptocurrency market bounced back from its two-year slump, numerous projects have seen their token unlock dates arrive. According to recent reports, investors and founders who were given these tokens in return for financial investments or labor commitments now have the freedom to cash them out.

As an analyst examining the data from TokenUnlocks’ research, I’ve identified that out of the 138 tokens under their observation, 120 of them are slated for implementation this year. The aggregate market worth of these tokens amounts to roughly $58 billion.

The expected selling by venture capitalists (VCs) after unlocking their shares has triggered a reflective response in market prices, with non-VC investors trying to anticipate and buy before the selling pressure hits, leading to significant price drops compared to current market rates.

The value versus cost of cryptocurrencies like DYDX, Avalanche (AVAX), and Pyth (PYTH) have been significantly influenced by token unlocks. Specifically, the price of DYDX has dropped by more than half since mid-March, while AVAX and PYTH have likewise experienced substantial decreases. The scheduled unlocking of tokens in May has intensified the selling trend for these three digital assets.

In the cryptocurrency market, token unlocks that once influenced price trends in 2023 are now garnering increased focus from investors and the public. This renewed interest is driven by a shift towards realizing short-term gains rather than holding for the long term with altcoins featuring upcoming unlock events.

Liquidity Crisis? 

Amongst the top 90 non-stablecoin assets listed on centralized exchanges (CEXs), a noteworthy observation is that since March 14, when Bitcoin (BTC) hit an all-time peak of $73,700, just 12 of these assets have experienced gains, while a significant number of 81 have incurred losses, as per the report.

Bitcoin experienced a decrease of approximately 12% from its highest point, while over 25% was the average loss for the leading 100 cryptocurrencies.

As a researcher studying the cryptocurrency market, I’ve observed that smaller altcoins often experience heightened selling pressure during market declines. This trend holds true even for those altcoins closely tied to major network tokens such as Ethereum (ETH) and Solana (SOL). The unlocking of these tokens can intensify this selling pressure, leading to a more pronounced impact on the altcoin market.

As a market analyst, I’ve observed that the present economic climate poses challenges for infrastructure initiatives that were initiated during the bear market period, based on recent reports from Bloomberg.

As these projects introduce their tokens into the market, regular buyers face high prices due to insufficient demand. The market for altcoins presently exhibits a scarcity of liquidity and an oversupply of unlocked tokens, resulting in price decreases.

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2024-06-25 07:16