Altcoin
Here’s what’s behind altcoin weakness, according to Cosmo Jiang, Portfolio Manager at Pantera Capital
Pantera Capital, an investment firm focused on digital assets, highlights the main reasons why it believes the altcoin market is in crisis.
In his latest Blockchain Letter, Pantera Capital portfolio manager Cosmo Jiang He says that macroeconomic conditions are hurting the cryptocurrency market, along with fears of oversupply and a rise in altcoin projects.
Jiang further states that the recent actions by the United States Securities and Exchange Commission (SEC) against blockchain development firm Consensys and decentralized exchange (DEX) Uniswap (UNI) due to alleged violations of securities laws, have created regulatory uncertainty for alternative projects.
“We point to some macro and crypto-specific reasons for the decline. The main macro headwind in early April was that markets started to price in a longer-term higher rate environment due to a still-strong economy and elevated inflation, in contrast to the previous view that there would be a rapid rate cut.
On the cryptocurrency side, markets have been weighed down primarily by concerns about oversupply. For Bitcoin, the German government has begun liquidating its $3 billion position and the timing of the $9 billion Mt. Gox distribution has been confirmed. Long-tail tokens have faced supply headwinds due to both the surge in new token launches, diversifying investor focus and limited capital, and the ongoing vesting of private investors from newly launched tokens over the past year.
Additionally, the SEC investigations into Consensys and Uniswap have created some uncertainty for some protocols.”
Jiang says that Bitcoin (BTC) and Ethereum (ETH) have significantly outperformed the overall cryptocurrency market in 2024.
“Overall, breadth has been limited and there has been significant underperformance year-to-date across the broader cryptocurrency landscape versus Bitcoin and Ethereum, which is analogous to the dynamics of equities this year, the Magnificent 7 versus the rest. To help illustrate this point, we’ve included the return distributions for the top 400 tokens by market cap this year below.”
Source: Pantera Capital
At the time of writing, Bitcoin is trading at $65,314, up 1.6% in the last seven days. Meanwhile, Ethereum is trading at $3,327 at the time of writing, down nearly 2% in the last week.
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