Analysts have discussed the risks of buying Altcoins today.

The cryptocurrency market has seen significant changes, with many analysts wary of investing in altcoins.

Historically, bull markets have seen Bitcoin and Ethereum rise first, followed by altcoins. However, current conditions indicate a change in this pattern.

Why buying Altcoins is risky.

Quinn Thompson, founder of crypto hedge fund Laker Capital, recommends investing in altcoins at this time. He pointed to several indicators of market volatility, including high leverage and open interest, a lack of panic-driven buying and a stable coin supply.

He believes the market is facing increasing selling pressure, particularly from venture capital funds that need to raise capital, leading to more selling than buying. This situation, combined with low summer trading volumes, makes it difficult to find altcoins.

“I think there is serious risk in crypto, and especially expect most altcoins to bounce back. The market seems to have lost momentum even in the majors, while leverage and open demand are still high,” Thompson said.

Thompson identifies two main reasons for his position. First, the impact of Bitcoin and Ethereum exchange-traded funds (ETFs) and the issue of altcoin supply inflation.

The introduction of Bitcoin and Ethereum ETFs has changed the structure of the market. In the past, capital has flowed from major cryptocurrencies like Bitcoin and Ethereum to altcoins in bull markets. However, with more than $50 billion now invested in Bitcoin ETFs, these funds do not have the same methods for investing in altcoins.

This change has limited the capital available for altcoins, causing their prices to rise. According to Samara Epstein Cohen, chief ETF officer at BlackRock, traditional market participants increasingly focus on tokenization in favor of Ethereum, which sidelines altcoins.

Read more: How to invest in real-world crypto assets (RWA)?

The rapid launch of new altcoins has also flooded the market and created massive inflation. Many projects aggressively release large amounts of tokens, creating a supply that exceeds demand.

Thompson indicated a lack of interest in supporting the expected monthly altcoin supply inflation to $3 billion over the next one to two years. While some altcoins are still performing well, identifying these successful tokens will be more challenging than in previous years.

“Altcoins have sustained selling pressure. As we head into an already low-volume summer, the combination of significant token offering openings and selling pressure from venture capitalists could make for an uphill battle for most tokens,” Thompson said.

Meanwhile, Will Clements, co-founder of Reflexivity Research, reflects on how the market has evolved. In the year Investing in high-beta altcoins in 2020 was a profitable strategy because these assets outperformed Bitcoin. However, this approach is no longer effective.

Many altcoins have underperformed Bitcoin in recent months, which has changed the dynamics of the market.

“In 2020, you're going to be at risk, those things will have a high beta for Bitcoin and all the vaporware and everything will go up. We haven't seen this time. Many altcoin to Bitcoin pairs have been bleeding for months now and it has never been as simple as buying any vaporware altcoin and saying you are better than Bitcoin.

Technical analyst Michael van de Pop highlighted that Bitcoin is near or at all-time highs, but most altcoins have not reached previous highs. This difference shows a lack of confidence in altcoins, which will continue to struggle in the current market conditions, which suggests that the days of easy profits from altcoins may be over.

Read more: 10 Best Altcoin Exchanges in 2024

Investors should be aware of the increased risks and consider new conditions before making a decision on the cryptocurrency market.