Bitcoin
Time for altcoin investors to panic, says crypto hedge fund – DL News
- The crypto market could be in for tough times, crypto hedge fund Lekker Capital told DL News.
- Decreasing demand, increasing supply, and a changing market structure could be especially difficult for altcoins.
The crypto market is on the verge of a serious sell-off cascade.
This is according to Quinn Thompson, founder of crypto hedge fund Lekker Capital.
“Expect most altcoins to be delisted,” Thompson he said. “The market appears to have lost any capacity for recovery, even in large companies, while at the same time leverage and open interest remains high.”
Thompson said DL News that the introduction of spot Bitcoin exchange-traded funds has changed the structure of the crypto market.
In previous bull markets, flows trickled out of Bitcoin and Ethereum into smaller cryptocurrencies as traders became bolder.
But these days, 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 clearly and simply a lack of demand to support the roughly $3 billion of monthly inflation in altcoin supply over the next year or two,” Thompson said. DL News.
“Just like in stock markets where some stocks perform well and others perform poorly, that will be the case here, and dispersion will continue to increase, not decrease,” he added.
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More supply, less demand
Thompson noted that ETF flows are gradually declining and that venture funds are raising capital by selling their cryptocurrency holdings. The supply of stablecoins – sometimes used as a metric by traders to gauge demand – has also plateaued.
“Despite a number of attempts to break all-time highs, Bitcoin simply has not been able to gather traction,” said Thompson.
The lull in demand will likely be felt particularly by altcoins, Thompson said, because many crypto projects will unlock the supply of their tokens.
In other words, project teams and their investors will continue to have increasing access to coin stocks that they have been prevented from selling until now. And new buyers are now unlikely to step in to cushion the blow.
“As we enter a low-volume summer period, the combination of significant 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 market correspondent for DL News. Have any tips on crypto markets? Contact tcarreras@dlnews.com