‘Money-hungry VCs’ are bad for long-term token launches – Analyst
For profit-seeking venture capitalists (VCs), long-term sustainability and price action are bad for newly launched cryptocurrencies.
While they bring new liquidity to altcoin startups, VCs introduce significant selling pressure that will hurt the token's long-term price action, noted crypto analyst Line 2 FI wrote in an April 22nd Substack post:
“Unsanctioned token listings and money hungry VCs are bad for individual tokens in the long run. 100 new tokens are launched every year. By dissolving the existing ones. It is now April 2024, and the entry into altcoins seems more selective and not enough to compensate for the large openings.
One of the main issues in the current trend of token startups is the high fully diluted value (FDV) at first, which promises big windfall allocations for early adopters but also comes with huge opening schedules for early VC investors. This method results in a price drop for most new tokens. According to Route 2 FI:
“I think most new VC scam coins (high FDV coins) will eventually drop solid AF. And you can use this to your advantage in pair trading or whatever situations you want.
The total market capitalization of altcoins, Bitcoin (BTC), stood at $1.05 trillion at the time of writing, up 38 percent year-on-year, from $760 billion in early 2024, according to TradingView data.
In the case of large VC openings, it is the lack of interest from crypto investors that has not been able to cover the coin circulation and sales pressure, writes the analyst of the simulation.
“At some point the supply will exceed the demand and we will start to turn downwards due to high inflation. Early buyers get trapped, which leads to a sense of embarrassment among the community, reduced TVL in protocol, Davis (if any) going to greenfields and stopping team members.
Related: Europe's biggest banks thanks to crypto regulations – Bitpanda
Is 2024 the end of the crypto altseason?
During previous market cycles, altcoins have historically surged after Bitcoin to new highs, as profits from Bitcoin sales have flowed into other cryptocurrencies.
However, with more than 300 decent projects, there isn't enough liquidity for all the top altcoins to rise together, which could be the end of the altcoin trend. Route 2 FI says:
“We hear a lot about the altseason, but this time I think things will be different… but ask yourself who is buying all these signs. It will be a perpetual PvP fight unless establishments or retailers come in large numbers.
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