Many are still expecting the arrival of the altseason, looking at the growth waves of the crypto market in past years. However, optimists overlook an important factor: the number of coins has significantly increased compared to previous cycles.
By the most conservative estimates, the number of cryptocurrencies has increased seven to eight times compared to the first altseason of 2017-2018.
If we consider the tokens that are not tracked by monitoring services like CoinGecko and CoinMarketCap, their number exceeds several million. In May 2024 alone, 455,000 tokens were issued on the Solana blockchain, 177,000 on Base, and 39,000 on BNB Chain. Another 20,000 were created during the same period on the Ethereum mainnet, as well as in L2 solutions like Arbitrum and Optimism.
Such scales simply will not allow the entire market or any significant part of it to grow. As evidence, we can observe how, in past years, individual categories and trends developed rather than altcoins as a whole.
For example, the meme-coin market grew from essentially one coin, Dogecoin, to an entire sector with a capitalization of around $50 billion, with almost 900 positions listed on CoinGecko.
This can also include the artificial intelligence trend, which allowed OpenAI's CEO Sam Altman to simultaneously promote Worldcoin.
The fractalization of the market is growing at enormous rates, at times reaching unreasonable proportions. As of early July 2024, CoinGecko distinguishes 354 separate categories, a number that is likely to continue growing. However, not all narratives become popular. Data from 2023 showed that more than 50% of traffic was concentrated in five areas: AI, GameFi, meme-coins, the Solana ecosystem, and RWA.
Some categories remained popular in 2024. According to analysts at BiteyeCN, memes became the most successful market with growth of over 1800%. The RWA segment also significantly outperformed BTC and ETH in returns, with the sector's indicator exceeding 213%. Thus, the market's capacity relative to growth opportunities becomes limited for a large number of tokens and coins simultaneously. Noticeable capitalization growth is primarily driven by major coins like Bitcoin, ETH, and a few others.
Therefore, one should not expect the arrival of a classic altseason at all, nor the growth of entire categories of projects. Instead, we are likely witnessing the formation of a large number of index narratives.
For example, the growth of the American market is typically measured by the S&P 500 index, where about 30% of the value is formed by just seven companies (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) out of the 500 listed.
This means that altseason in the future may represent a local short-term growth of trends and blue chips in certain categories, where some market participants will receive super-profits, while the portfolios of others will remain largely unchanged or even incur losses.
