Altcoins
“Crypto Winter” Arrives Soon for Altcoin Market as Venture Capital, Founder Sells Off Mt.
The altcoin market is experiencing an early “crypto winter” as early investors and founders of various projects sell off their tokens.
According to a recent Bloomberg relationshipthis decline can be attributed to a combination of factors, including the unlocking of tokens held by venture capitalists (VC) and founders, as well as the selling pressure caused by the correlation between altcoins and major network tokens.
The Altcoin market has been hit by the token unlock wave
As the cryptocurrency market recovered from its prolonged decline two years ago, tokens from many projects reached unlock dates this year. According to the report, venture capitalists and founders who received these tokens in exchange for investments or business contributions now have the opportunity to sell them.
Of the 138 tokens tracked by researcher TokenUnlocks, 120 are expected this year, with a combined market value of around $58 billion.
This early selling resulting from VC unblocking has led to downward price reflexivity non-VC holders attempt to anticipate selling pressure, often resulting in deep discounts to spot prices.
The price performance of altcoins such as DYDX, Avalanche (AVAX), and Pyth (PYTH) has been significantly affected by the token unlock. DYDX’s token price has more than halved since mid-March, while AVAX and PYTH have also seen significant declines. The unlocking of these three tokens was expected in May, increasing selling pressure.
Token breakouts, which had previously helped push prices into 2023, are now receiving more attention from both VCs and public participants, prioritizing short-term profits over long-term holdings for altcoins with breakouts.
Liquidity crisis?
In particular, from March 14th, when Bitcoin (BTC) reached an all-time high of $73,700, according to the report only 12 of the top 90 non-stablecoin assets tracked on centralized exchanges (CEX) recorded positive returns, while 81 recorded negative returns.
Bitcoin is down about 12% from its peak, and most of the the first 100 tokens have decreased by more than 25%.
Smaller altcoins, including those related to major network tokens like Ethereum (ETH) and Solana (SOL), tend to be sold off first in case of a decline. Token unlocking exacerbates this selling pressure, further impacting the altcoin market.
According to Bloomberg, the current market presents challenges for infrastructure projects financed during the bear market.
Although these projects launch their tokens, demand from “regular buyers” is limited and at high prices. The altcoin market is currently characterized by a lack of liquidity and the unlocking of a surplus of tokens, resulting in downward pressure on prices.
Featured image from DALL-E, chart from TradingView.com