A crypto analyst warns that altcoins need a strong bull market to prevent venture capital funding from drying up.
The need for a bull market
Reflexivity Research founder Will Clemente shared that the altcoin market must experience a substantial rally for crypto projects to continue attracting healthy amounts of venture capital.
In an X post Clemente stated that without this rally, fewer crypto projects will receive funding, which could lead to lower valuations in the altcoin market.
Now the problem is that he expressed skepticism about the chances of such a rally happening, citing the increasing supply of altcoins entering the market.
“With the amount of supply coming onto the market, I expect dispersion and am just not confident this will happen.”
Thousands of ’real’ projects, and maybe millions of others
CoinMarketCap is tracking over 8,000 cryptocurrencies, making it challenging to pinpoint the exact number of existing tokens.
Clemente explained that the heavy investments in altcoins, which are seen as high-risk and high-reward assets, are failing to meet market performance standards.
He pointed out that too much money was given to funds that are now clearly underperforming because they are mostly investing in “beta” assets.
As traders and analysts debate whether the alt market will see a rally similar to past cycles, James Check from Glassnode expressed doubt.
He argued in a podcast that new crypto traders tend to rush into buying the most speculative assets too quickly.
“The joke has been told, everybody knows the punchline, and they’ve just gone straight to the punchline, and it is just not funny anymore.”
Not every alts are equal
Michael van de Poppe, founder of MN Trading noted on X that some alt are performing well and showing momentum.
Feels strange, right?#Altcoins going up day after day.
Some particular ones are doing great, through which we're starting to show some momentum.
I don't believe September is going to be worse, I think we'll gradually accelerate upwards from here.
— Michaël van de Poppe (@CryptoMichNL) September 12, 2024
Analysts from Bitfinex also observed that certain altcoins have remained relatively strong despite Bitcoin’s decline.
They suggested that this shift might indicate a change in how investors protect their capital during uncertain market conditions.
“The shift hints at a potential regime change where investors are exploring value in altcoins, diverging from the typical pattern of flocking to Bitcoin during downturns.”
The need for capital in altcoin projects raised inconvenient questions within the crypto community. If altcoins rely on funding or venture capital, they may be viewed as early phase startups that have yet to prove their viability.
In contrast, Bitcoin has no funding, no company structure, and no VC backing, yet it has become a trillion-dollar asset class with millions of users worldwide.
This situation raises the question of whether altcoins might be a dead end in the long run.
