作宇：Kristian Sandor, CoinDesk

Compiled by: Felix, PANews

Key points:

  • In the past few months, SOL, AVAX, APT, SUI, etc. have experienced 40%-70% corrections, which have suppressed the sentiment of the altcoin market, while BTC and ETH have only fallen about 15% from their annual highs.

  • Markus Thielen noted that venture capital funds are under pressure to sell tokens in order to realize profits from investments made in past years.

  • Anagram partner David Shuttleworth said the lack of capital inflows into the crypto market "has had a particularly adverse impact on tokens that are about to be unlocked in large quantities, newly issued tokens, and airdrop programs."

The crypto market is experiencing a healthy correction (at least for those who invested in BTC and ETH) after a massive rally from October to March. However, it is a brutal correction for those holding altcoins, with the market sentiment in the crypto community akin to bear market-like desperation.

While BTC and ETH are only 15% below their yearly highs, altcoins such as SOL and AVAX are down 40% to 50% from their March peaks, while SUI and APT are down 60% to 70%.

Selling pressure from venture capital funds, combined with increased supply token unlocking, a lack of new crypto capital inflows, and seasonal trends have all contributed to altcoin weakness.

Unlocking leads to high dilution

The token supply of many altcoins is constantly diluted due to unlocking and distribution, as most tokens are locked up by early investors or earmarked for ecosystem development and grants.

For example, Arbitrum’s token ARB, a token on the Ethereum L2 network, is priced close to its all-time low since September last year, despite its market capitalization rising from $1 billion to $2.5 billion, due to a significant increase in supply.

Another example is Solana, whose supply is increasing by 75,000 tokens per day, worth about $10 million at current prices.

Quinn Thomson, founder of crypto hedge fund Lekker Capital, pointed out on the X platform: "Unlike ETF inflows and bond buybacks, which continue to passively buy stocks, cryptocurrencies, especially altcoins, have the opposite situation - continuous selling pressure."

Much of the selling pressure came from venture capital funds that were looking to realize profits from projects they invested in early in the past few years.

"VC funds invested $13 billion in the first quarter of 2022, just as the market quickly entered a bear market," Markus Thielen, founder of 10x Research, said in a report last week. "As AI becomes a hotter field, these funds are now under pressure from investors to return their money."

When market interest in smaller, more speculative crypto assets wanes and trading volumes decline, as they have over the past few months, there isn’t enough demand to absorb the dilution.

Lack of new capital inflows

Inflows into crypto markets have also stagnated or even reversed in the past few weeks, as evidenced by the market value of stablecoins.

The combined market capitalization of the four largest stablecoins — Tether’s USDT, Circle’s USDC, First Digital’s FDUSD and Maker’s DAI — has been flat since April after growing by $30 billion earlier this year, according to TradingView data.

Total market capitalization of USDT, USDC, FDUSD and DAI (TradingView)

Anagram partner David Shuttleworth noted in an X post citing Nansen data that stablecoin balances on exchanges fell by $4 billion to their lowest level since February. “This is very negative for the impact on the upcoming large-scale unlocking of tokens, new issuance of tokens, and airdrop programs,” Shuttleworth said.

Recently launched tokens Wormhole (W), Ethena (ENA), and Starknet (STRK) have all seen their token prices plummet by approximately 60-70% from their respective highs and face billions of dollars worth of token distributions in the coming years.

Seasonal trends are also bearish for smaller market cap coins, with June typically being a negative month for altcoins.

TradingView data shows that the total market value of crypto assets other than BTC and ETH (TOTAL3 indicator) has fallen in June every year over the past six years.

This month is no exception, with TOTAL.3 down over 15% so far.

Related reading: Market liquidity is still dry, when will the “rising tide” come?