This Is The Biggest Issue With Altcoins This Cycle: Crypto Analyst

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As an experienced analyst, I share Miles Deutscher’s concerns about the current state of the altcoin market and the impact of the proliferation of new crypto tokens on it. The ease of deploying new tokens on-chain has led to an inflated token count and market saturation, which in turn contributes to dilution and strained market liquidity.

In a recent discussion on X, Miles Deutscher, a well-known figure in the cryptocurrency analysis field, pointed out a major weakness he sees in the current altcoin market. Speaking to his large audience, Deutscher explained how the explosive growth of new crypto tokens is contributing to the lackluster performance of altcoins during this market cycle.

The Proliferation Of Crypto

As a researcher studying the crypto market since April 2024, I’ve observed an astonishing increase in the number of new crypto tokens, surpassing one million. Notably, around half of these newcomers are memecoins predominantly launched on the Solana network. The simplicity of deploying these tokens on-chain has resulted in this inflated count, but it also raises a more significant concern – market saturation and dilution.

Deutscher explains, “Currently, we hold approximately 5.7 times as many crypto tokens as we did during the bull market peak in 2021. This excessive token supply is a significant contributor to the challenges the crypto market has faced this year, despite Bitcoin reaching new record highs.” He draws a comparison between this influx of new tokens and inflation, stating that “the more tokens that enter the market, the greater the overall pressure on supply.”

An analyst provides insights into the intricacies of venture capital (VC) investments in the cryptocurrency sector. Notably, they highlight that the biggest VC funding quarter reached a record-breaking $12 billion in Q1 2022, coinciding with the market’s shift towards bearishness. Critics like Deutscher question the approach of VCs, acknowledging their investment as crucial for project growth but expressing concerns over potential market distortions.

VC investors, similar to retail investors, act on opportunities. Their investment decisions are primarily focused on achieving high returns rather than fostering consistent project growth. This approach results in fluctuating market trends, with periods of peak investment following phases of reduced activity.

The continual influx of new cryptocurrencies puts a significant strain on market liquidity and undermines investor confidence, particularly among individual investors. According to Deutscher, this skew toward private markets is one of the most detrimental issues in crypto, in comparison to other markets such as equities and real estate.

In this setting, new investors face significant hurdles to join the liquidity pool, making them spectators rather than participants. This sense of exclusion is intensified by high-profile collapses such as LUNA and FTX. According to Deutscher, if retail investors believe they cannot succeed, they are less likely to engage, explaining why meme culture has thrived in 2021 – it’s the only arena where they feel they can make a difference.

Moving forward, Deutscher puts forth various approaches to address these concerns. Exchanges may implement stricter token distribution guidelines and give priority to larger community portions. Furthermore, altering the proportion of tokens released during the initial sale can aid in managing selling pressure more efficiently.

As a researcher, I firmly believe that insufficient action from within the industry shouldn’t hinder the natural progression of the market. I advocate for robust listing and delisting procedures among exchanges as essential tools in safeguarding market authenticity and ensuring sufficient liquidity.

In wrapping up his speech, Miles Deutscher expresses his belief that his perspectives will lead to improved comprehension and may inspire a reconsideration of existing methods. “Scattering isn’t the sole issue, but it is a significant one—and one that merits further open dialogue to cultivate a stronger and more robust crypto community.”

At press time, Ethereum (ETH) traded at $3,562.

This Is The Biggest Issue With Altcoins This Cycle: Crypto Analyst

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2024-06-19 09:40