Altcoins Are Not Pumping, Dragonfly Partner Discusses Three Scenarios

by

As a seasoned crypto investor with several years of experience under my belt, I find Qureshi’s analysis both insightful and reassuring. Having witnessed the erratic behavior of altcoins following halving events in the past, I have grown accustomed to the market volatility that comes with investing in these digital assets.

Historically, altcoins have experienced significant price fluctuations following the halving event. Nevertheless, the current market atmosphere towards these cryptocurrencies is remarkably subdued. Haseeb Qureshi, Dragonfly’s Managing Director, offered an insightful explanation for the lack of the anticipated bullish surge in altcoins.

Qureshi drew attention to coins listed on Binance that have seen poor performance in recent times based on commonly available data. These coins, which have faced criticism for their high fully diluted valuations (FDV) and meager initial circulating supplies, appear to be struggling to make headway. Qureshi sought to challenge prevalent beliefs and provide an insightful analysis grounded in facts.

Theory 1: VCs and KOLs Are Dumping on Retail

A common notion exists that venture capitalists (VCs) and influential figures (key opinion leaders, or KOLs) might be transferring their assets to individual investors in the retail sector. Consequently, it’s assumed that tokens featuring shorter holding restrictions could experience larger sell-offs as a result.

As a researcher examining the behavior of cryptocurrency tokens, I’ve come across Qureshi’s observation that the data does not back up the theory in question. Prior to early April, these digital assets showed relatively steady performance, with some even trading above their listing prices. However, an unexpected downturn emerged around mid-April, affecting a wide range of tokens irrespective of their lockup terms. This pattern implies a market-wide event rather than insiders orchestrating coordinated selling, according to Dragonfly partner’s assessment.

Theory 2: Retail Investors Are Fleeing to Memecoins

An alternate explanation proposes that retail investors are abandoning newly emergent altcoins for the allure of meme coins. Nevertheless, Qureshi’s findings reveal that the meme coin craze reached its pinnacle in March, while the descent of the altcoin bundle commenced around mid-April.

Furthermore, Binance’s trading data showed that memecoin pairs made up a small portion of the exchange’s overall trading volume. This implies that although meme coins have gained popularity, they do not exclusively account for the recent slump in altcoins. Qureshi explained.

As a researcher studying financial trends, I can confirm that the concept of financial nihilism holds weight, particularly within certain circles such as Connecticut. However, it’s essential to remember that the majority of individuals worldwide continue to invest in digital tokens, driven by their faith in the underlying technology and its potential stories for growth.

Theory 3: Insufficient Supply for Price Discovery

According to the third hypothesis, the limited availability of newly minted tokens in circulation hinders accurate pricing determination. In Qureshi’s opinion, this theory holds some merit but remains somewhat debatable.

He noted that the existing low supply levels are not unusual when put in perspective with past market cycles. Nevertheless, a scant float can pose challenges, as demonstrated by cryptocurrencies such as Worldcoin (WLD) and Filecoin (FIL), which experienced significant issues due to their initial scarcity. However, Qureshi emphasizes:

Based on this theory, the coins with the lowest market caps (or “floats”) are expected to underperform, while those with larger market caps should fare better. However, our observation does not align with this assumption as all coins, regardless of their size, appear to be experiencing similar losses.

Solution

Qureshi expresses confidence in the future value of altcoins, pointing out that market discrepancies tend to even out over time. He supports his argument with historical examples showing that early price declines have often resulted in substantial profits in the long run.

At present, the Dragonfly collaborator implores all concerned parties to keep their efforts centered on developing meaningful technology. He recommends that venture capitalists motivate entrepreneurs to adopt a realistic approach when it comes to setting valuations and deciding on token listings, suggesting they initially price tokens moderately.

Read More

2024-05-20 16:54