- The cryptocurrency market could be going through tough times, cryptocurrency hedge fund Lekker Capital told DL News.
- Decreasing demand, increasing supply, and a changing market structure could be especially difficult for altcoins.
The cryptocurrency market is on the verge of a serious cascade of liquidations.
That's according to Quinn Thompson, founder of crypto hedge fund Lekker Capital.
“Expect most altcoins to be withdrawn,” Thompson saying. “The market seems to have lost any ability to rebound, even in major currencies, while at the same time, leverage and open interest “It is still high.”
Thompson said DL News that the introduction of Bitcoin spot exchange-traded funds changed the structure of the crypto market.
In previous bull markets, flows would flow from Bitcoin and Ethereum into smaller cryptocurrencies as traders became bolder.
But today, investors who gain exposure to Bitcoin through ETFs don't have an easy way to buy altcoins, or currencies other than Bitcoin, in their brokerage accounts.
“There is, plain and simple, a lack of demand to support the roughly $3 billion of monthly altcoin supply inflation over the next year or two,” Thompson said. DL News.
"Just like in stock markets, where some stocks do well and others do poorly, that will be the case here, and the dispersion will continue to increase, not decrease," he added.
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More supply, less demand
Thompson noted that ETF inflows are declining and that venture funds are raising capital by selling their cryptocurrency holdings. The supply of stablecoins, sometimes used by traders as a metric to gauge demand, has also stagnated.
“Despite several attempts to surpass all-time highs, Bitcoin simply could not muster the strength,” Thompson said.
The pause in demand will likely be felt particularly in altcoins, Thompson said, because many crypto projects will unlock the supply of their tokens.
In other words, the project teams and their investors will continue to have more and more access to coin reserves that they could not sell until now. And now new buyers are unlikely to step in to cushion the blow.
"As we enter an already low-volume summer period, the combination of major token supply unlocks and selling pressure from venture capitalists will likely be too much of an uphill battle for most tokens," Thompson said.
"There is no panic yet," he added. "I hope that changes."
Tom Carreras is a markets correspondent for DL News. Do you have any advice on the crypto markets? Contact tcarreras@dlnews.com
