#trump #USAElection #usa #BidenCryptoCritique
In the wake of President Joe Biden's underwhelming debate performance last week, the prospects for Donald Trump, his crypto-friendly opponent, seem to have improved. Despite this political shift, Bitcoin and smaller altcoins have been trading lower than they were before the debate. Why is this happening?
Traders point to other significant market factors influencing the current trends. Key among these are the anticipated selling of Bitcoin from the bankrupt Mt. Gox exchange estate and the distribution of additional tokens, or "unlocks," from smaller digital currencies.
“There is no escaping the fundamental laws of supply and demand,” explains Spencer Hallarn, global head of OTC trading at GSR. “Between the widely anticipated Bitcoin distributions set to begin from the Mt. Gox bankruptcy estate and the slew of sizable token unlocks scheduled for the coming weeks and months, the wave of new supply staring the crypto market in the face has served as a substantial weight on prices.”
Bitcoin experienced its second consecutive day of decline, trading near its lowest levels in over a month. The largest cryptocurrency dropped as much as 3.7% to $59,623, a level not seen since May.
“The market continues to face supply overhang in a seasonally low liquidity, low volatility period,” said Shiliang Tang, president of principal trading firm Arbelos Markets. “With the German government/Silk Road/Mt. Gox Bitcoin supply overhang coupled with continued monthly unlocks in venture coins, there’s not enough fresh capital inflows to absorb this.”
Since Bitcoin’s peak in March, the market capitalization of altcoins (excluding Ether and stablecoins) has seen a significant decline. In the early days of crypto, all tokens besides Bitcoin were called altcoins because they were an alternative to the original digital currency, which still holds more than 50% of the estimated $2.4 trillion digital-asset market.
This year, many projects are unlocking portions of their tokens, meaning venture capitalists and founders can finally sell the digital assets they received years ago for investing or contributions. With the crypto market recovering from the prolonged decline of the crypto winter two years ago, many long-term investors find this an attractive time to sell. Out of 138 tokens tracked by researcher TokenUnlocks, 120 have unlocks this year, with a combined market value of about $58 billion as of last month.
Low volatility in Bitcoin and Ether has created tough conditions for altcoins, which typically thrive in moving markets. According to David Zimmerman, a DeFi analyst at K33, almost all altcoin sectors have suffered, with GameFi tokens taking a "significant hit" while AI tokens remained stagnant. This has occurred despite a spike in new token launches, averaging 250,000 new coins each month in the second quarter on Ethereum and major Ethereum-based layer-two chains.
“As majors continue to chop and pull back somewhat during this ‘low-vol summer,’ the altcoin markets have been hit relatively hard,” Zimmerman noted on Wednesday. One notable exception has been memecoins, which have grown to a $50 billion collective market capitalization. Tokens focused on the US political race and celebrities have been the biggest drivers.
A measure tracking the total crypto market capitalization without Bitcoin and Ether fell nearly 22% in the second quarter, “indicating that altcoin beta is doing exactly what it is designed to do by outperforming – only it is to the downside in this case,” Zimmerman said.
--With assistance from Olga Kharif and Benjamin Taubman.
