Altcoin
Altcoins Hit the Wall in the Face of Wave of New Tokens
17:00 ▪ 3 minute read ▪ by Fenelon L.
The cryptocurrency market is bracing for a new wave of turbulence. Several major token issuances are expected in the coming days, raising concerns among investors about their potential impact on prices. This comes as the market as a whole struggles to find a stable equilibrium.
A source of concern for programmed inflation
Managing the circulating supply is a major challenge for most altcoinsWhile the issuance of new tokens aims to support the development and adoption of the affected projects, it raises concerns about their impact on valuations.
This problem is particularly visible in the case of XRP: despite its overall valuation hitting all-time highs in 2021, the oversupply of circulating tokens has kept its individual price below $1.35.
This phenomenon is not isolated. Promising crypto projects like Avalanche (AVAX) are struggling with annual supply growth of over 10%, which inevitably hinders their market progress.
The schedule for the coming weeks includes several significant new token injections. For example, the Optimism (OP) platform is set to introduce another 10 million tokens in mid-July, increasing its supply by about 1%. Meanwhile, Starknet (STRK) is considering a more substantial expansion with 64 million additional tokens, representing a 5% increase in its circulating supply.
Various strategies in response to the influx of new tokens
Projects are taking different approaches to managing these issuances. Arbitrum (ARB), a leading Ethereum scaling solution, is about to distribute 92.6 million tokens to its team and investors. This decision comes as ARB’s price approaches all-time lows, raising questions about the timing of the move.
Others are betting on these token issuances to reignite interest in their ecosystem. Axie Infinity (AXS), struggling after the GameFi crisis, will issue 2.45 million tokens as staking rewards. ApeCoin (APE) will follow a similar strategy by issuing 15.6 million tokens, hoping to revive enthusiasm for the project.
In a market on the risethese issues may have boosted prices in the medium term. However, the current situation reverses this dynamic. Teams and investors are trying to maximize their sales, putting further pressure on already fragile prices.
The influx of new tokens in a cryptocurrency bear market represents a major challenge for these altcoins. Their ability to absorb this additional supply without a price collapse will be a crucial test of their resilience and attractiveness to investors.
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Fenelon L.
Passionate about Bitcoin, I like to explore the intricacies of blockchain and cryptocurrencies and share them with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I have understood that Bitcoin is the tool that can make this possible.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be construed as investment advice. Do your own research before making any investment decisions.