Author: 10x Research
Compiled by: Felix, PANews
Today’s headlines resonate with anyone who traded altcoins in 2017 or 2021. 10x Research analyzed 115 coins, and the average price has fallen 50% from its 2024 high. As explained below, unless liquidity in cryptocurrencies improves, the decline will be much more severe. Bitcoin (-11%) and Ethereum (-13%) are performing well, and both may benefit as smarter traders rotate from altcoins to them (as has happened in the past two cycles).
Top 115 Tokens by Market Cap: Pullback from 2024 Highs (Bitcoin only down 11%)
One of the key factors to survive the altcoin bear market is effective risk management. Token unlocking and unfavorable liquidity indicators are the main triggers of this altcoin crash.
Last week was a critical moment in the crypto space and one of the most critical weeks of 2024. Cryptocurrencies, especially altcoins, fell sharply. The market had a hard time digesting the massive token unlocking of Aptos $97 million, IMX $51 million, STRK $75 million, SEI $62 million, ARB $90 million, APE $18 million, and UNI $90 million, totaling $483 million. Early investors and venture investors seem to be under pressure to cash out. These capital flows are dragging down Bitcoin.
In addition, Bitcoin miners have begun selling their Bitcoin inventory, and the ETH balance on exchanges has increased by $2.5 billion, which was previously associated with potential selling pressure. Despite the improvement in inflation data, Bitcoin ETFs have seen a large net outflow (about $660 million in 5 days). The overall net flow of various segments (stablecoins, futures leverage, ETFs, etc.) is -$2.4 billion, which is the third week of net flow decline since the launch of the ETF in January 2024.
On May 8, 10x Research issued a warning, "Beware of token unlocking. Will venture capital funds shorten the altcoin cycle?, as nearly $2 billion worth of tokens will be quickly unlocked in the next ten weeks. This may reduce the price of the altcoin market." A core argument is that venture capital funds invested $13 billion in the first quarter of 2022, and the market quickly entered a bear market. As artificial intelligence becomes a hotter field, these funds are now under pressure from investors to return capital.
Today, altcoins are in a brutal bear market. 73% of these 115 coins peaked in March 2024. But in early March, the situation changed. 17% of the top 115 coins by market cap (left) peaked on March 14 (and are now all down).
In early March 2024, Bitcoin reached a potential year-end target of $70,000. Last year, 10x Research predicted a year-end target of $45,000 for 2023. In October 2022, it was predicted that Bitcoin would rise to $63,000 when the halving occurs in 2024. A higher target ($125,000) can be derived through quantitative analysis, but the shrinking liquidity of the crypto market is hindering the market's development.
Related reading: Viewpoint: Where will the crypto market go after the “618” discounts?
