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Time for Altcoin Investors to Panic, Says Crypto Hedge Fund – DL News
- The cryptocurrency market may be going through difficult times, cryptocurrency hedge fund Lekker Capital told DL News.
- Decreasing demand, increasing supply, and a changing market structure could be particularly challenging for altcoins.
The cryptocurrency market is on the verge of a severe cascade of liquidations.
That’s according to Quinn Thompson, founder of crypto hedge fund Lekker Capital.
“Expect most altcoins to be withdrawn,” Thompson She said. “The market seems to have lost all ability to rebound, even in the majors, while, at the same time, leverage and open interest remains high.”
Thompson said DL News that the introduction of Bitcoin spot exchange-traded funds has changed the structure of the cryptocurrency market.
In previous bull markets, flows poured from Bitcoin and Ethereum into smaller cryptocurrencies as traders became bolder.
But these days, investors who get exposure to Bitcoin via ETFs don’t have an easy way to buy altcoins, or coins other than Bitcoin, in their brokerage accounts.
“There is a clear and simple lack of demand to support the roughly $3 billion in 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 some do poorly, this will be the case here too 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 as a metric by traders to gauge demand, has also reached a plateau.
“Despite a series of attempts to break out of all-time highs, Bitcoin has failed to muster strength,” Thompson said.
The lull in demand will likely be particularly felt by altcoins, Thompson said, because so many crypto projects will unlock supplies of their tokens.
In other words, project teams and their investors will continue to have more and more access to coin supplies that have so far been blocked from sale. And new buyers are now unlikely to step in to cushion the blow.
“As we enter an already low-volume summer period, the combination of significant token supply unlocks and selling pressure from venture capitalists will likely be too much of a fight for most tokens,” Thompson said.
“Don’t panic for now,” he added. “I expect things to change.”
Tom Carreras is a market correspondent for DL News. Do you have a tip on the cryptocurrency markets? Contact tcarreras@dlnews.com