Altcoins slump: VCs not to blame, says VC
Free markets hold key to price correction, report argues
Geopolitical tensions a possible culprit
Haseeb, a partner at Dragonfly Capital, recently published a report titled “Why Are All These Low Float/High FDV Coins Down Bad?” that examines the widespread downturn in altcoin markets. The report challenges several prevailing theories attempting to explain the phenomenon, ultimately arguing for the role of free market forces in correcting asset valuations.
Haseeb disputes the notion that VCs and Key Opinion Leaders (KOLs) are dumping tokens on retail investors. He points to the simultaneous price decline across all altcoins in mid-April, regardless of lockup periods for VC investments. Haseeb, himself a VC, argues that reputable firms adhere to strict lockup schedules and regulations imposed by the SEC, making widespread early selling highly unlikely.
Similarly, Haseeb pushes back against the theory that retail investors have abandoned altcoins in favor of memecoins. He highlights the misalignment between the decline in altcoin prices and the surge in memecoin popularity.
“Data on trading volume for Shiba Inu (SHIB), a prominent memecoin, does not coincide with the downtrend in altcoins,” Haseeb explains. “The peak of memecoin frenzy occurred in March, whereas the decline in this basket of altcoins happened a month and a half later, in April.”
This dissonance suggests that retail investor behavior may not be the primary driver of the altcoin slump.
Furthermore, Haseeb argues against the idea that a limited circulating supply inherently hinders price discovery in altcoin markets. He points to the weak correlation between the size of a token’s circulating supply and its market performance, suggesting this explanation is flawed.
Instead, Haseeb proposes that broader market forces, such as geopolitical tensions, may have contributed to the synchronized decline in altcoin prices. He expresses confidence in the ability of free markets to self-correct over time. As investors absorb current losses, future token offerings will likely be priced more cautiously, leading to a more stable market environment.Haseeb concludes by emphasizing the multifaceted nature of market dynamics. He argues against assigning blame to any single factor or group for the recent altcoin downturn. Instead, Haseeb underscores the importance of allowing market forces to play their natural role in adjusting valuations.
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