Cryptocurrency analyst points out significant fundamental flaw driving altcoins to outperform in current cycle
Cryptocurrency analyst Miles Deutscher recently brought attention to a significant underlying issue he believes is responsible for the lackluster performance of altcoins in the current market cycle.
Deutscher shared his insights in a detailed thread on X (formerly Twitter) on June 18th. He pointed out that the root of the problem lies in the unprecedented influx of venture capital (VC) funding that flooded the crypto space in 2021 and has resurfaced recently.
The aim of his thread was to shed light on the major challenge facing the crypto industry, explaining how the situation evolved, why prices are behaving as they are, and what the potential path forward might be.
In addition to the surge in VC funding, there was also a notable increase in the number of new crypto projects during the same period. Deutscher highlighted that the total number of crypto tokens tripled between 2021 and 2022.
The subsequent bear market caused many of these projects to postpone their launches, as Deutscher emphasized that introducing a project during a bearish period could be detrimental. Therefore, when the market eventually recovered in Q4 of 2023, a flood of delayed and new projects inundated the market.
Deutscher’s findings indicate that over one million new crypto tokens have been introduced since just April. This massive influx has led to what he termed “altcoin dispersion,” equating it to inflation in traditional economies.
He explained that printing more tokens reduces crypto’s purchasing power relative to other currencies like USD. Currently, there is an estimated $150 million to $200 million of new supply pressure daily due to token unlocks and launches.
The constant sell pressure, coupled with a lack of new liquidity entering the market, has resulted in the stark underperformance of altcoins compared to Bitcoin. Deutscher believes that addressing this issue will require changes from various industry players, including exchanges, project teams, and VCs.
Furthermore, Deutscher expressed concern that retail investors may be deterred from participating in a market dominated by private investors. He highlighted that many new projects launch with multi-billion dollar market caps, leaving little room for price discovery and leading to overvaluation.
Despite the challenges, Deutscher maintains optimism about the future of the crypto market, emphasizing that the market has a tendency to self-correct and adjust. He believes that a more retail-friendly market would benefit everyone involved.
While recent market conditions have been harsh on altcoins, some analysts see opportunities amidst the turmoil. Trader Jelle, for instance, views altcoins as a rare chance for investors to capitalize and advises against getting discouraged.
It is important to note that the information provided in this article should not be construed as investment advice, as investing in cryptocurrencies carries inherent risks.
