Investors are closely watching when the altcoin season will arrive. If incremental funds continue to favor spot ETFs and existing funds struggle to support the unlocking and dumping of altcoins, this cycle may be different from previous ones.
In past bullish cycles, after mainstream currencies like Bitcoin surged, the altcoin rally would soon follow. However, in this cycle, times have changed. Even though Bitcoin has already surged significantly, the altcoin rally has not arrived. Odaily Star Daily will analyze the impact of spot ETFs and the oversupply of altcoins.
Spot ETFs are diverting new entry funds for this cycle. The emergence of Bitcoin spot ETFs may be changing the market structure. During past bull markets, the path for incremental funds was to first flow into major cryptocurrencies like Bitcoin and Ethereum, with value later overflowing into altcoins.
However, this bull market may be different. For new players entering the market, rather than investing in high volatility cryptocurrencies, they may choose to invest in crypto ETFs through a more familiar and traditional way, leading these funds to flow towards more stable Bitcoin spot ETFs.
This shift will make it difficult for new funds to flow into altcoins, making it harder for them to appreciate. As stated in “Data Analysis: ETFs are Delaying the Real Bull Market,” even though crypto players are anticipating institutions to launch spot ETFs for altcoins, achieving this goal in this cycle seems difficult. Even BitMEX founder Arthur Hayes is cautiously optimistic, suggesting that a Dogecoin ETF may be launched by the end of this cycle.
Altcoins face continuous selling pressure due to oversupply. The scarcity of incremental funds is only one aspect, with another factor being the massive unlocking of new altcoins and VC selling pressure, causing the market supply of altcoins to far exceed demand.
Starting from mid-April, the growth of stablecoin market value has slowed down, increasing by only about $500 million over two months, indicating a slowdown in new funds entering the crypto industry. However, according to TokenUnlocks data, tokens worth $800 million are set to be unlocked in June alone, including mainstream projects like dYdX, SUI, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT), and Starknet (STRK).
The sudden influx of these newly unlocked tokens is bound to create turbulence in the market, especially with the slow growth of incremental funds and existing funds unable to absorb such a large token supply. Additionally, some early VCs have seen returns of over 10 times on altcoins, leading them to continuously sell in the market for profit-taking or due to concerns about the future market, ultimately causing a chain reaction of sell-offs and driving altcoin prices downwards.
As Lekker Capital founder Quinn Thompson mentioned, in the next one to two years, around $3 billion in market funds will be needed monthly to address the supply inflation of altcoins. While some altcoins may still perform well, identifying these tokens will be more challenging than in previous cycles.
Overall, for cryptocurrency investors, do not overly expect the future altcoin market. The altcoin season may be absent this time.