Fun

‘Money-hungry VCs’ are bad for token launches in the long term — Analyst

News Feed - 2024-04-23 09:04:13

Zoltan Vardai11 hours ago‘Money-hungry VCs’ are bad for token launches in the long term — AnalystCurrent inflows into altcoins are insufficient to offset some of the big token unlocks and selling pressure from VCs.1101 Total views21 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksProfit-seeking venture capitalists (VCs) are bad for the long-term sustainability and price action of newly-launched cryptocurrencies.


Despite bringing new liquidity for altcoin launches, VCs introduce significant sell pressure that damages the token’s long-term price action, according to popular crypto analyst Route 2 FI, who wrote in an April 22 Substack post:“Permissionless token listing and money-hungry VCs are bad for the individual token long term. Every year 100 new tokens launch. Diluting existing ones. It’s now April 2024, and inflows into altcoins seem way more selective and not enough to offset big unlocks.”


One of the main issues with the current token launch trend is their initially high fully diluted valuation (FDV), which promises big airdrop allocations for early adopters but comes with large unlocking schedules for early VC investors. This mechanism will lead to a price decrease for most of these new tokens. According to Route 2 FI:“I think most new VC scam coins (high FDV coins) eventually will dump hard AF. And that you can use this to your advantage in pair trading or in situations where you want to hedge.”


The total market capitalization of altcoins, excluding Bitcoin (BTC), stood at $1.05 trillion at the time of writing, up 38% year-to-date, from $760 billion at the beginning of 2024, according to TradingView data.Total altcoin market capitalization, year-to-date chart. Source:TradingView


The issue with large VC unlocks is the lack of demand from crypto investors, which is unable to cover the large increase in a coin’s circulating supply and the selling pressure, wrote the pseudonymous analyst.“At some point, the supply will outnumber the demand and we will start spiraling downwards due to massive inflation. Early buyers will get trapped, which leads to bearish sentiment among the community, reduced TVL in the protocol, devs (if any) leaving for greener fields, and team members quitting.”


Related:Europe’s largest banks are moving into crypto thanks to regulations — BitpandaIs 2024 the end of crypto altseason?


During previous market cycles, altcoins have historically pumped after Bitcoin’s rise to new highs, as profits from Bitcoin selling are rotated into other cryptocurrencies.Altcoin Hype Cycle. Source:Rekt Capital


However, with over “300 decent projects,” there isn’t enough liquidity for all the top altcoins to rise together, which could be the end of the altcoin season trend. Route 2 FI said:“We hear a lot about altseason, but this time around I think things will be different… But ask yourself who is going to buy all these tokens. Unless institutions or retail are coming in masses, it will just be a forever PvP fight.”


Related:Bitcoin price breaks above $66K — Has BTC flipped bullish again?# Cryptocurrencies# Altcoin# Venture Capital# Airdrop# DeFiAdd reaction

News Feed

XRP At Make-Or-Break Technical Zone, Crypto Analyst Warns
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
JPMorgan Strategist Estimates Ether’s Fair Value at $1,500 Amid Competition From ‘Ethereum Killers’
JPMorgan Strategist Estimates Ether"s Fair Value at $1,500 Amid Competition From "Ethereum Killers" A strategist at JPMorgan stated that ether’s fair value is way lower than
AMC Theatres on Track to Accept 4 Cryptocurrencies Next Month: CEO Expects Dogecoin and Shiba Inu to Follow
AMC Theatres on Track to Accept 4 Cryptocurrencies Next Month: CEO Expects Dogecoin and Shiba Inu to Follow The CEO of the world’s largest movie exhibition company, AMC Ente
Joe Hall7 hours agoSmall Islands, big problems: Can Bitcoin fix this? Cointelegraph Cape Verde videoA small island nation in the Atlantic Ocean grapples with a cash economy influenced by tourism, remittances and limited
Moody’s Warns of Potential Financial Disruption Spillover Beyond US Banking Sector
Moody"s Warns of Potential Financial Disruption Spillover Beyond US Banking Sector Roughly ten days ago, the credit agency Moody’s Investors Service downgraded the U.S. banki
Another AT&T SIM Swapping Hack Targets Trio of Crypto Execs
A crypto executive is suing AT&T over a SIM swapping hack that he claims cost him $1.7 million in digital assets in a hit aimed at three executives attending Consensus 2018 Vide
First-Time Bitcoin Buyers ‘Doubled’ in Square’s Q3 Report
Square processed $148 million in bitcoin sales in the third quarter of 2019. The payments company, founded by Twitter co-founder Jack Dorsey, released its earnings results on Wednes
SEC Halts $62 Million Crypto Mining, Trading Scheme — DOJ Indicts Founder
SEC Halts $62 Million Crypto Mining, Trading Scheme — DOJ Indicts Founder The U.S. Securities and Exchange Commission (SEC) has halted a $62 million global cryptocurrency trading
Nigeria Foreign Exchange Crisis: Worsening US Dollar Shortages Point to Further Devaluation
Nigeria Foreign Exchange Crisis: Worsening US Dollar Shortages Point to Further DevaluationPressure on Nigeria’s current exchange rate is likely to get worse in 2021, when the
Restaking protocol EigenLayer flips Aave with $10.4B total value locked
Jesse Coghlan3 hours agoRestaking protocol EigenLayer flips Aave with $10.4B total value lockedEigenLayer is now the second-largest DeFi protocol behind Lido after taking Aave’s spot.640 Total views2 Total sharesListen
Rep. McHenry hopes digital asset bill passage will be his ‘biggest win’
Derek Andersen7 hours agoRep. McHenry hopes digital asset bill passage will be his ‘biggest win’The retiring chair of the U.S. House Financial Services Committee is optimistic about digital asset legislation now befo
Bank of England Hikes Bank Rate to 0.5%, Governor Andrew Bailey Hints at Wage Restraints
Bank of England Hikes Bank Rate to 0.5%, Governor Andrew Bailey Hints at Wage Restraints The Bank of England (BOE) raised the country’s benchmark bank rate from 0.25% to 0.5