Bitcoin (BTC) has risen to a high of $73,000 this year (the current price has fallen back to $65,500), but the altcoins in the hands of many people are in a state of falling more than rising, and some even suffer a sharp drop in price. This situation has never occurred in previous bull markets.

In addition to mainstream cryptocurrencies such as Bitcoin and Ethereum (ETH), the altcoin market is also worthy of attention. However, the "altcoin season" similar to 2021 that the market has been waiting for has not yet appeared. Although the overall performance of cryptocurrencies in the first quarter of this year was good, there is still a significant gap compared with the bull market in 2021.

You should know that in 2021, the altcoin market has risen across the board. Hundreds of altcoins have doubled in price within a month, and some have even doubled several times. The price increase of most altcoins is much higher than that of Bitcoin. Investors just need to know how to buy and hold on to it.

The general rise of altcoins usually refers to a period when altcoins outperform Bitcoin and prices soar across the board. This year, some people in the market have discussed the reasons for the absence of altcoins in the current bull market, but few analyses have focused on the flow of funds and explored why the money-making effect of altcoins has declined rapidly after 2021.

A large number of tokens unlocked

The dilution from the massive token unlocking has hampered this altcoin season. This factor has absorbed a lot of organic inflows, and even if the technology is good, it is difficult for prices to rise when supply exceeds demand.

According to TradingView data, Bitcoin's market value has increased by 324% from $330 billion in January 2023 to $1.4 trillion in 2024. During the same period, the market value of altcoins increased from $85 billion to $350 billion, an increase of 3.11%. Although Bitcoin has set a new high in 2021, the market value of altcoins is close to 85% of its peak in 2021.

However, a detailed analysis of the market capitalization of altcoins shows that of the $265 billion increase, about $100 billion came from the release of restricted tokens, $60 billion came from the issuance of new tokens, and the actual increase in market capitalization due to rising token prices was only $105 billion. In other words, in the past year or so of bull market, more than half of the monthly increase in altcoins was occupied by the release of old tokens and the issuance of new tokens.

In addition, according to 10x Research, the scale of altcoin unblocking is expected to reach $20 billion in the next six months, and nearly $6 billion in new tokens will be issued each month. The contradiction between this dumping supply and limited demand will lead to an increasingly serious liquidity dilemma in the altcoin market.

More and more projects

The market appears to be full of liquidity, but it is overwhelmed by too many projects. According to third-party statistics, as of 2024, the number of cryptocurrencies has exceeded 2.52 million, which is 5.7 times more than the 440,000 cryptocurrencies at the end of 2021. The number of cryptocurrencies has shown a significant growth trend in recent years. In September 2022, the number of cryptocurrencies exceeded one million for the first time. By the end of the year, it had increased to 1.15 million, a year-on-year increase of 159.2%. This year, only a few areas , such as artificial intelligence (AI) and Solana (SOL) ecology, have experienced the arrival of the "copycat season" market.

The Impact of Bitcoin/Ethereum ETFs

The approval of Bitcoin and Ethereum ETFs has changed the rules of the game in the altcoin market. It means that Bitcoin and Ethereum are becoming compliant and accepted by the general public and traditional financial institutions, and many traditional financial institution investors are now directly purchasing Bitcoin ETF assets.

In the past, the path of funds was Bitcoin-Ethereum-copycat-MEME. Now, the passage of ETFs has indeed brought a large amount of incremental funds, making Bitcoin more resilient in the current bull market than in previous corrections.

Previously, Bitcoin was mainly obtained through centralized exchanges, which should have been good news for the altcoin market because investors could easily switch from Bitcoin to altcoins. However, the investors who bought Bitcoin this time are different. Investors who bought Bitcoin or Ethereum through ETFs have a more complicated path to the altcoin market.

Earlier this year, Matrixport analyst Markus believed that the current market may only be a Bitcoin bull market, and does not involve altcoins. He said that investors who buy ETFs believe that "this bull market is very different. The last bull market was DeFi summer, and altcoins were the protagonists, but this time it is mainly focused on Bitcoin."

Will the altcoin bull market come?

In the current market environment, it seems unrealistic to expect the market to recreate the altcoin bull market of 2021. Therefore, even if there is an altcoin bull market in the future, it is likely to be a structural market.

Although token unlocking and additional issuance are the main unfavorable factors restricting the rise of altcoins, the $225 billion altcoin market value is still insignificant for the blockchain industry, which is still in a highly prosperous stage. In the future, projects that can be driven by endogenous growth still have the potential to grow tenfold or even a hundredfold.

In general, a market crash is still a good opportunity to buy high-quality altcoins at a low price. When the market enters the stock game stage, the right to speak and the right to set prices will gradually be concentrated in the hands of those with sufficient funds.

In this round of altcoin craze, the biggest winners are undoubtedly PE and VC companies. They will continue to adopt the existing profit model: investing in and incubating new projects, and then pushing up valuations and realizing cash by listing on exchanges. Therefore, short-term trading opportunities will still appear in new or sub-new coins. In the past month, the second wave of Binance's new coins has been verified in BB, NOT, and IO, and ZK is likely to follow this rule.

In summary, although the full bull market of 2021 may not be repeated in the short term, some quality projects are still expected to achieve significant growth in the future. #山寨季何时到来？ #以太坊ETF批准预期