A cryptocurrency analyst says the altcoin market needs to see a major rebound if cryptocurrency projects hope to continue receiving large amounts of venture capital funding.
Will Clemente, co-founder of Reflexivity Research, said in a Sept. 12 X post that unless altcoins see a “massive bull run,” fewer crypto projects will be funded, leading to a decline in valuations for the entire altcoin market.
Clement expects funding to be 'dispersed'
But Clement expressed doubts about the chances of the altcoin market pulling off such a rally.
“With so much supply coming to the market, I would expect some dispersion, but I am not sure if that will happen,” he wrote.
Outside of the top 10 cryptocurrencies, altcoin market dominance has fallen 23.10% over the past six months. Source: TradingView
CoinMarketCap said it tracks more than 8,000 cryptocurrencies and that it is difficult to determine the “exact number” of tokens in existence.
Clement explained that heavy investments in altcoins are seen as high-risk, high-reward assets that have failed to meet market performance standards.
“My view is that too much money is being invested in current funds, which are significantly underperforming their benchmarks because the bulk of the money is allocated to ‘beta’ funds.”
Currently, traders and analysts are questioning whether the altcoin market will experience a similar rally as in previous market cycles.
James Check, chief analyst at Glassnode, believes that the situation will not develop as expected because new cryptocurrency traders rush to buy the most speculative assets too early.
“The joke’s told and everybody knows the punchline, but they go right to the punchline and it’s no longer funny,” Checker said on the Aug. 29 episode of the Rough Consensus podcast.
Traders try to outperform the market
By analyzing the behavior of traders during the 2021 bull run and comparing it to the behavior in 2024, Check said traders tried to outperform the market by directly buying the most hyped memecoins as quickly as possible.
In past bull runs, memecoins have typically surged at the end of broader market rallies, but this time around, the assets are rising faster than ever before.
“In 2021, we had this bubble of everything, it was this beautiful waterfall of capital, Bitcoin, Ethereum, L1, DeFi, all the way to monkey JPEG,” Check explained, noting that many crypto natives have now figured out that the fastest way to make the most money is to “buy the dumbest tokens.”
Other analysts remain optimistic
However, other cryptocurrency traders have expressed a more optimistic attitude towards the altcoin market.
“Some of these are performing very well and we are starting to show some momentum,” MN Trading founder Michael van de Poppe wrote in a Sept. 12 X post.
“I don’t think it’s going to be worse in September; I think we’re going to gradually accelerate upwards from now on,” van der Poppe added.
“Altcoins are undervalued. I’m buying,” added anonymous cryptocurrency trader Mister Crypto.
Despite Bitcoin’s recent slide, altcoins have remained relatively strong, suggesting that investors may be adjusting how to protect their capital during periods of market uncertainty.
“This shift hints at a potential institutional change, with investors exploring the value of altcoins, a departure from the typical pattern of flocking to Bitcoin during economic downturns.”
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