Altcoins
Why the altcoin market declines after token unlocking
Altcoins will face an early crypto winter, mainly due to large token unlocks in 2024.
Second Bloomberg, the first investors of the project try to quickly sell the received tokens, wanting to secure short-term profits. At the same time, they do not want to keep altcoins unlocked on their balance sheets, with an eye on future growth.
Data from Unlocks via token The platform, which tracks 138 projects, indicates that 120 are expected to unlock tokens in 2024. Analysts estimate the total market value of this asset volume to be $58 billion.
Edward Chin, co-founder of investment firm Parataxis Capital, believes that massive sales of such assets are putting severe pressure on the altcoin market. At the same time, brokers often have to offer potential buyers tokens of early investors at a discount of up to 40%.
“The market is strange right now, as the many infrastructure projects funded by bear market investors are now coming to token launches, but there are not many repeat buyers of these tokens at high prices.”
Lex Sokolin, co-founder of Generative Ventures
How does unlocking affect tokens?
The timing and extent of token unlocking can have a significant impact on market dynamics. Unlocking multiple tokens at once can reduce purchasing interest and temporarily lower token prices.
Token unlock events can cause market fluctuations as investors react to the new supply of tokens. Investors can adjust their positions based on the unlock schedule and the expected impact on token prices, resulting in price changes.
Which tokens crashed after the unlock?
For example, the token of the dYdX project, DYDXhas fallen 61% in the last three months. At the time of writing, the asset is priced at $1.4 and has a market cap of $838 million.
Source: CoinMarketCap
A similar situation is observed in the Pyth network (PITH) and avalanche (AVAX) projects. Over the same period, their tokens declined by 55% and 66%, respectively.
All three projects listed were unlocked in May 2024. General market volatility exacerbates the situation altcoinsOf the 90+ largest crypto assets by market cap, only 12 have shown positive returns since mid-March 2024.
According to statistics, about 80 projects show negative dynamics in this indicator. At the same time, the price of 23 assets fell by more than 50%.
Cryptocurrency winter on the altcoin market
10xSearch Analysts note that the price of the top 115 altcoins has fallen by more than 50% from their 2024 peaks. This correction is mostly similar to declines seen in previous market cycles in 2017 and 2021. Without an influx of new funds and the restoration of liquidity, the decline in altcoin prices may continue.
“Today, altcoins are in a brutal bear market. In 2024, 73% of those 115 coins peaked in March. We were right to call for Bitcoin to outperform everything else, especially Ethereum, but in early March that changed.”
10xSearch
As altcoins collapse, the two leading cryptocurrencies, Bitcoin (Bitcoin) and Ethereum (ET), have shown relative resilience. They are down 11% and 13% respectively from this year’s peaks.
“Surviving the altcoin bear market depends on one crucial factor: effective risk management. Token breakouts and unfavorable cryptocurrency liquidity indicators are the primary catalysts for this altcoin collapse.”
10xSearch
In May, analysts warned of a potential drop in altcoin prices due to the unlocking of a significant volume of tokens. Nearly $2 billion in unlocked tokens are expected to enter the market before July, which could lead to a crypto sell-off and price decline.
According to experts, this situation is due to the actions of venture capital funds. In the first quarter of 2022, these funds invested $13 billion in altcoins. Under pressure from investors who want to return their funds, venture funds are forced to sell their tokens. The situation is aggravated by growing investor interest in artificial intelligence (Artificial intelligence).
Should traders wait for altcoin season?
The share of Bitcoin the total capitalization of the entire cryptocurrency market, the volume of which amounts to $2.4 trillion, is at 54.6%. The so-called Bitcoin Dominance Index indicates the market cycle and investor sentiment, with smaller cryptocurrencies typically outperforming Bitcoin and Ethereum in terms of growth rates.
As a rule, the share of the main digital currency in the total capitalization of the entire cryptocurrency market grows during cyclical downturns in the industry. During a bullish period in the market, when many altcoins grow faster than Bitcoin, it declines. Therefore, the first cryptocurrency dominance index indicates the market cycle and investor sentiment.
Swissblock analysts called the conditions for the start of the altcoin season. Experts believe that traders should monitor the ETH/BTC price ratio, which is the price of Ethereum in Bitcoin equivalent. The growth of the ETH/BTC pair is traditionally considered a harbinger of an influx of capital into alternatives
Crypto technical analyst Titan also expressed confidence in the upcoming April altseason.
According to him, the altcoin market is poised for significant growth. The analyst pointed out that the post-halving phase of BTC usually becomes a turning point for them. Technical charts suggest that altcoins will soon take center stage, foreshadowing a potentially profitable altseason.
Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.