I just dug into all the data to analyze both perspectives and I was shocked by the results.
This article will be divided into two parts:
First, we’ll examine the arguments that altcoin fragmentation is harmful to the crypto market.
Next, we’ll explore those who claim that $BTC and altcoins are about to break out.
What are we waiting for? Let’s dive in!
Chapter One
First, let’s look back to 2020-2021, when $BTC surged from $4k to $64k.
New liquidity has been pouring in rapidly, driven primarily by retail investors.
Many people believe that the bull run will never end and prices will rise further.
Risk appetite is at its peak.
This was the period when many venture capital firms began to inject unprecedented amounts of capital into the space. Everyone wanted a piece of this delicious pie called cryptocurrency.
These large investments help finance projects and provide capital for development.
Additionally, VCs often provide additional services and connections to help projects grow.
Low entry barriers and high potential during the bull market have made Web3 a hot spot for startups.
Cryptocurrency is already seen as the currency of the future.
New tokens are emerging at a rapid pace, tripling the total number of cryptocurrency tokens between 2021 and 2022.
But soon, the party was over.
A veritable wave of liquidations from LUNA to FTX devastated the market.
Many people fell into depression and lost all their savings.
Launching a project during a bear market is like signing its death certificate.
What did the projects that raised funds at the beginning of the year do?
They delay their commitments as long as possible.
Low mobility, bad mood and lack of interest keep them at a loss, and we can’t blame them.
In the fourth quarter of 2023, after months of delays, the founders were finally ready.
Projects can now launch their tokens under better conditions.
So they did. One by one, the tokens started launching.
Then, a veritable tsunami of tokens hit the market.
It’s not just old projects that are launching – many new players are also seeing the bullish conditions as an opportunity to launch projects and make a quick profit.
As a result, 2024 saw the most new token launches in history, with nearly six times more cryptocurrency tokens than at the peak of the 2021 bull run.
This is a major problem and one of the main reasons why crypto has struggled this year, even as $BTC reached new all-time highs.
Why?
The increasing number of token launches adds cumulative supply pressure to the market.
This supply pressure accumulates over time.
Many 2021 projects are still being unlocked, and supply pressure is piling up year after year…
This constant pressure from sellers is causing huge damage to the market.
Simply put, think of token dilution as inflation. When the government prints more dollars, it reduces the purchasing power of the currency relative to the value of goods and services.
In cryptocurrencies, we are now facing very similar problems.
Now, let's consider the views of those who think that this is not a big deal and expect that a real bull run is about to begin, as in 2020-2021, when everything will soar on a daily basis.
Chapter two
The current bearish sentiment needs to be scrutinized.
Emotions are running high and the market is dominated by fear.
Some believe the market is destined to fall back to $16k.
However, here are some reasons to think we are still in a bull market
We are currently experiencing a 15-week consolidation and a 17% retracement from highs.
Such volatility is perfectly normal after nearly doubling from recent lows in January.
Although it may feel frustrating and boring, this phase is part of the natural process.
Volatility is currently low, which is understandable for several reasons:
- No clear narrative.
- There is uncertainty before the ETH ETF.
- Summer has always been a period of stagnation for cryptocurrencies.
However, staying bullish during these tough times could pay off handsomely in the long run.
Let’s discuss why
The current cycle is technically very similar to the 2017 and 2021 bull runs.
We are now in an accumulation phase, which means that once an asset price breaks out of the accumulation phase, it usually moves parabolicly.
Especially with the recent bearish news:
Mt. Gox sells its $BTC
$BTC ETF daily outflows
Germany sells $3 billion in $BTC
However, these news are similar to the “China bans cryptocurrencies” headlines from previous cycles.
All of this FUD (fear, uncertainty, doubt) is temporary and designed to make you doubt your investments.
Now let’s take a broader view of the current cryptocurrency landscape and identify key indicators and catalysts:
1. The Fed’s balance sheet trend reverses.
The chart is trying to find a bottom after nearly two years of decline.
We know that when the Fed starts purchasing assets, it will increase liquidity in the traditional financial sector.
Since cryptocurrency is closely correlated with traditional markets, it will also benefit from increased liquidity.
The stablecoin index indicates new capital entering the crypto market.
Currently, we are still far from the liquidity levels of the previous cycle.
More liquidity = more opportunities = greater risk appetite.
Also, here’s a really nice TG bot that notifies you when stablecoins are printed:
➬ stablecoinprinter
2. Large countries such as Canada and Switzerland have already lowered interest rates.
Given this trend, the United States may soon follow suit.
Because the order is always as follows:
1. Rate cuts
2. Increase the money supply
3. More funds injected into traditional finance
4. More money flowing into riskier assets (like our favorite cryptocurrencies)
3. The US election in November 2024.
You may have noticed that cryptocurrency is a key part of politics right now, especially in the Trump vs. Biden race.
Trump even promised to end Biden's "war on cryptocurrencies.
Strong support from the U.S. government could significantly boost the overall market.
4. The last catalyst is the upcoming ETH ETF approval.
While the exact date remains uncertain, rumors suggest it could happen in July.
However, this milestone could clarify trends in altcoins and pave the way for more ETFs like the Solana ETF.
I believe we are still in the early stages of the bull market and low volatility should not be a cause for concern.
Remember the bullish drivers, hold on, and enjoy the rest of the summer. Spend more time outdoors, and less time looking at charts.
There’s more to come this year.
We will all succeed, I am sure of it.
