Original｜Odaily Planet Daily

Author: Golem

In the past bull market cycle, when mainstream coins such as Bitcoin rose, the rise of altcoins would start soon. But in this cycle, the times have changed. Even if Bitcoin has risen sharply, the rise of altcoins will not come. Odaily Planet Daily will analyze the impact of spot ETFs and the oversupply of altcoins.

Spot ETFs draw out new funds entering the market in this cycle

The advent of Bitcoin spot ETFs may be changing the market structure. During the past bull market, the path for incremental funds to enter the market was: first flow into major cryptocurrencies such as Bitcoin and Ethereum, and then the value overflowed into altcoins.

But this bull market may be different. For new players, instead of investing in highly volatile cryptocurrencies, it is better to invest in crypto ETFs in a more familiar and traditional way, and this part of the funds will naturally flow to the relatively more stable Bitcoin spot ETF.

The amount of BTC held by Bitcoin spot ETF accounts (Source: CryptoQuant)

This shift will make it difficult for new funds to flow into altcoins, making it more difficult for the latter to appreciate. As Odaily Planet Daily author jk said in "Data Extraction: ETFs are Delaying the Real Bull Market": "The issuance of Bitcoin and Ethereum ETFs will not only attract new funds, but will also affect investor behavior and drain future liquidity in the market; many retail investors and investors who are not familiar with cryptocurrencies are likely to invest their funds directly in ETFs at the beginning of the bull market, and new projects will face the embarrassing situation of having no users and no audience who recognize the technical narrative."

Although crypto players are also looking forward to the launch of spot ETFs for altcoins by institutions, it is clear that this cycle is still a bit difficult to achieve. Even BitMEX founder Arthur Hayes only optimistically predicted that the Dogecoin ETF may be launched at the end of this cycle.

Altcoins are oversupplied and face continued selling pressure

The lack of incremental funds is only one aspect. Another influencing factor is: the massive unlocking of new altcoins and the selling pressure from VCs have led to the market supply of altcoins far exceeding demand.

Total market value of stablecoins (Source: coingecko)

Since mid-April, the growth of stablecoin market value has slowed down, and it has only increased by about $500 million in two months, which indirectly proves that the growth of new funds entering the crypto industry has also slowed down in recent months. However, according to TokenUnlocks data, $800 million worth of tokens will be unlocked and flow into the market in June alone, including mainstream projects such as dYdX, SUI, 1INCH, Ethena (ENA), Arbitrum (ARB), Aptos (APT) and Starknet (STRK).

The sudden influx of these newly unlocked tokens is bound to create waves in the market, especially when incremental funds grow slowly and existing funds are unable to digest such a large supply of tokens.

In addition, some early VCs have earned more than 10 times the profit on altcoins. Due to the need to stop profits or concerns about the future market, they will inevitably continue to sell in the market, eventually causing a chain stampede, and the price of altcoins is destined to go down.

As Quinn Thompson, founder of crypto hedge fund Lekker Capital, said, it will take about $3 billion per month in market funds to cope with the supply inflation of altcoins in the next one to two years. While some altcoins may still perform well, identifying these tokens will be more challenging than in previous cycles.

In general, crypto investors, don’t expect too much from the future market of altcoins, as this round of altcoin season may be absent.