Altcoins
Why are many Altcoins bad? It’s not because of meme coins, VC points out
A new article by Haseeb QureshiManaging Partner at Dragonflychallenges popular narratives surrounding the recent collapse in altcoin prices.
What happened: Qureshi item challenged three prevailing theories regarding the underperformance of these altcoins: venture capitalists (VCs) and key opinion leaders (KOLs) dumping tokens, retail investors switching to meme coins, and low circulating supply hindering price discovery.
Qureshi presented data showing a significant decline in recent tokens listed on Binance, excluding explicit meme coins and tokens with previous token generation events (TGEs).
He used this data to disprove the first theory that VCs and KOLs are dumping tokens on retail investors.
“Every top-tier VC you can think of has at least a 1-year cliff and a multi-year vest before they get their tokens,” Qureshi said, noting that these VCs are still stuck, making the dumping theory implausible.
He then addressed the second theory, which states that retail investors are abandoning these tokens in favor of meme coins.
Comparing the trading volumes of these altcoins and similar meme coins Shiba Inu (CRYPTO: SHIB), Qureshi demonstrated that the timeline is not aligned.
“Memecoin mania was at its peak in March, but the basket was abandoned in April, a month and a half later,” he notes, arguing that this disconnect disproves the theory of a retail exodus to meme coins.
The third theory assumes that the low circulating supply of these tokens prevents significant price discovery.
Qureshi acknowledged that while a low float can be problematic, it is not a phenomenon unique to the current market cycle.
He provided historical data showing similar circulating supplies in previous cycles and noted: “If this theory were correct, you should see the coins with the lowest float being punished, and the coins with the highest float should be fine. But we don’t see a strong correlation.”
Qureshi concluded that these popular theories fail to explain the underperformance of these altcoins.
He instead attributed the decline to factors outside the market, particularly geopolitical tensions in the Middle East, which affected market sentiment in mid-April.
“The market decided it didn’t want to buy them back,” he points out, suggesting that the broader market environment is to blame, rather than specific problems related to market structure.
Looking ahead, Qureshi advised VCs to show pricing discipline, exchanges to list tokens at lower prices with better lock-up terms, and project teams to increase token supply from day one to improve stability of prices.
He reassured projects currently experiencing price declines, citing historical precedents where now successful projects initially faced similar drops.
“Let’s stay focused on building something we’re proud of and keep shipping. Markets will figure it out sooner or later,” he encourages.
What’s next: For those interested in further discussion about digital assets and their market dynamics, Benzinga’s The future of digital assets the November 19 event promises to be an in-depth platform.
Read next: Retail legend Roaring Kitty returns after three years – can she spark another frenzy?
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