Why Altcoins Are Crashing: Uncovering the Key Factors Behind the Plunge
After a great run from October to March, the crypto market is now struggling. While Bitcoin and Ethereum are holding up okay, smaller altcoins are crashing. Many online forums are full of negative sentiment as altcoin prices drop sharply. Is this just a short-term dip, or are altcoins headed for a longer slump?
Let’s take a closer look at what’s happening in the altcoin market and what it means for your investments.
Altcoins in Trouble
Bitcoin and Ethereum are only around 20% below their yearly highs. But major altcoins like Solana and Avalanche have fallen by 40% to 65% since their March peaks. Layer-1 tokens like SUI and Aptos are down even more, by 60% to 70%. Experts blame this steep decline on token unlocks, venture capital sell-offs, and a lack of new money coming into the market.
Token Supply Issues
A big problem for altcoins is the increasing token supply due to scheduled unlocks. For example, Solana’s daily token supply grows by 74,000 tokens, worth about $10 million at current prices. This influx of tokens, along with venture capital firms selling off their initial investments, is pushing prices down.
Stagnant Crypto Liquidity
Making things worse is the stagnant flow of money into the crypto market. The stablecoin market cap jumped by $30 billion earlier this year but has stayed flat since April. This suggests lower trading activity and less investor interest in stablecoins like USDT, USDC, FDUSD, and DAI.
Market Cap Changes
Looking at the combined market cap excluding Bitcoin and Ethereum, June 2024 has been tough for altcoins. As of June 24, 2024, the total market cap is $578.246 billion, a significant 21.% drop in just one month. This is a sharp decline from the peak of $718.02 billion earlier in June and the year’s high of $788.859 billion on March 11.
As the cryptocurrency market consolidates, smaller altcoins are facing major challenges.