Altcoins are DEAD! All of them are going to zero, the Bitcoin Maxis were right all along.
Well, not exactly.
Volume is poor and with big market makers like Jump Trading scaling back their crypto operations, this leaves order books thin. Which explains why such big moves on the weekend happen.
Regulatory scrutiny especially from the United States continues to hurt the industry. The SEC has recently charged Binance with mishandling customer funds, and illegally serving U.S. investors. While another crypto exchange juggernaut Coinbase was charged with illegally operating an unregistered securities exchange.
As exchanges begin to be targeted the collapse of one could leave crypto in a dire state. If exchanges play ball with regulators that would mean crypto would be even more challenging to on and off ramps.
It seems venture capital in crypto is also slowing down to a halt. With deal activity grinding to a halt. If the same amount of deal activity was completed from January to March for the rest of the year that would mean only $10.4 billion in deals happened. A staggering 63% decrease from 2022.
So the altcoin market is completely dead and will never revive. WRONG!
Builders keep on Building
Although the total crypto market cap is down over 66% from its peak, the total number of developers is only down around 18%. New changes to crypto projects code or as labeled “New Repos” also appear to still be strong. This signals that despite harsh market conditions, regulatory scrutiny, and negative media attention, projects remain focused.
These metrics are very relevant as it shows developers are still here and working. Due to tightening macro conditions crypto, like most risk assets, has seen a significant drop in price from all time highs. Although many speculators have left the space for the next shiny thing, developers have not.
While various projects continue to launch and narratives emerge, any true supporter of crypto is extremely excited about its future. The way to make outsized returns in crypto is by being early, having patience, and being right. Being early in the cycle with projects with strong fundamentals and narratives greatly increases the chance of outperforming the market.
The Bitcoin Dominance Cycle
Last bull market Bitcoin dominance got to a low of 39% and has since bounced to around 50%. Although Bitcoin maxis have taken a beating it seems making fun of altcoins always cheers them up. Even while losing money they can’t help but point out to altcoin bagholders how they’ve lost less money and how Bitcoin will gain 80% dominance soon.
A similar Bitcoin dominance bull run took place last cycle in 2018-2019.
During periods of poor market conditions when the survival of many altcoin projects becomes uncertain, capital flows back into the original where there is greater confidence in survival.
Ironically this mirrors traditional markets when once interest rates increase significantly and markets for risk assets become less attractive, Treasury Bills become more utilized. Bitcoin is the “safest” crypto asset so as a bear market hits capital rotates back from altcoins.
But don’t be fooled, this won’t last forever. Just as Bitcoin’s dominance rose in a bear run it will eventually fall back down again in a bull run. As investors seek greater returns a rotation into altcoins from Bitcoin will happen, once again creating a booming market for altcoins.
With the amount of development, upcoming projects, and new narratives the altcoin market is not going anywhere.
Zoom Out
With heightened regulatory scrutiny and a pullback in markets, many are calling for crypto’s end. However, just as many thought FTX’s insolvency would destroy crypto, this marked the bottom for Bitcoin and numerous other coins.
Those still depressed about the crypto market have obviously not paid attention this year. Bitcoin alone has rallied over 55% this year and not to mention the numerous projects up significantly.
Big players such as Sequia and A16z are committed and resilient to crypto. They have not left the space and continue to deploy capital. With billions at risk these gigantic funds are most certainly lobbying Congress.
The second highest paying lobbying company, right behind Coinbase, was the Blockchain Association. With big players backing these lobbyists such as Wintermute, Jump, Kraken, Crypto.com, Messari, Ledger, Polychain Capital, Ripple, and many more.
With regards to regulatory issues if the US is not willing to play ball then these titans will simply move to another country that wants their business. Unlike the internet boom where the US fostered innovation it appears they will be left out this time due to their refusal to learn about this new space. A16z has recently opened up a crypto office in London citing the United Kingdom has a more predictable business environment. More funds and projects will leave the US if they continue to hold an anti-crypto stance.
Although regulatory cooperation for crypto in the US appears grim, we believe they will still participate.
A bill was recently introduced to remove Gary Gensler from the SEC and restructure the whole agency. Perhaps a more crypto-friendly commissioner would step in and make compliance more transparent.
Patience is Key
A friend recently contacted me and was feeling disheartened after this latest sell off from $30.5k to $25.5k. So I quickly sent him a chart and asked, “Were these red arrows good buys?”
He said of course they were but he never gets that lucky. So I sent him this…
It’s the same chart but zoomed in on a lower time frame. This shows the drawdowns along the way. The first red arrow shows a drawdown of 80%, which turned out to be a fantastic buying opportunity.
He said, “Ok I will just forget my passwords…” I said great idea and then remember them in 2025.
Many try to actively trade and get so wild along the way that they underperform just riding the waves. Patience is one of the most significant virtues in investing. Results don’t happen overnight even if they appear that way in crypto.
