The Altcoin Market is Going Through a Tough Process: Analysts List the Reasons

As Bitcoin and Ethereum undergo a consolidation phase, many altcoins are experiencing a difficult period. Bitcoin and Ethereum prices have dropped by approximately 15% compared to their peak levels this year. For altcoins like Solana (SOL) and Avalanche (AVAX), this rate has risen to 40-50%, and for Sui (SUI) and Aptos (APT), it has climbed to 60-70%.

Selling Pressure Continues
Due to reasons such as token unlocking and distribution, many altcoins are experiencing a dilution effect in supply. These tokens are unlocked to be distributed to early investors, ecosystem stakeholders, etc.

For example, Arbitrum’s (ARB) market cap increased from $1 billion to $2.5 billion due to the rise in supply. However, during this period, ARB’s price hit all-time low levels.

Quinn Thomson, founder of Lekker Capital, said, “Unlike stocks that continually receive passive demand from ETF flows and share buybacks, cryptocurrencies, especially altcoins, face constant selling pressure.”

Markus Thielen, founder of 10x Research, mentioned that venture capital funds invested $13 billion in the first quarter of 2022, but this money is now at risk as the artificial intelligence sector has become popular.

No Fresh Money Entering the Market
The total market cap of stablecoins like Tether (USDT), Circle (USDC), First Digital (FDUSD), and Maker (DAI) has been flat since April. David Shuttleworth, a partner at Anagram, noted that the amount of stablecoins held on exchanges has decreased by $4 billion since February.

Shuttleworth stated, “This will have bad outcomes, especially for tokens that will unlock large amounts and conduct airdrop programs.”

Stay tuned for new updates.