Altcoins are currently facing a challenging time in the crypto market, as many projects are experiencing significant declines due to large token unlocks in 2024. Early project investors are eager to sell their tokens quickly to secure short-term profits and avoid keeping unlocked altcoins on their balance sheets for future growth. This trend is causing intense pressure on the altcoin market, with brokers offering potential buyers tokens from early investors at discounts of up to 40%.
As reported by the Token Unlocks platform, 120 out of 138 projects are expected to unlock tokens in 2024, with an estimated total market value of $58 billion. The massive sales of these assets are impacting market dynamics, leading to fluctuations in prices as investors react to the influx of new tokens. For example, tokens from projects like dYdX, Pyth Network, and Avalanche have experienced significant drops in value following their unlocks in May 2024.
According to data from CoinMarketCap, the token of the dYdX project, DYDX, has seen a 61% decline in the past three months, with a current price of $1.4 and a market capitalization of $838 million. Similar trends have been observed in the Pyth Network (PYTH) and Avalanche (AVAX) projects, with their tokens falling by 55% and 66%, respectively.
The overall market volatility has worsened the situation for altcoins, with only 12 out of the top 90 crypto assets showing positive returns since mid-March 2024. Analysts from 10xResearch note that the most prominent altcoins have dropped by more than 50% since their peaks in 2024, resembling declines seen in previous market cycles. Without new funds and restored liquidity, the fall in altcoin prices may continue.
In contrast, Bitcoin (BTC) and Ethereum (ETH) have shown relative resilience amid the altcoin market decline, with declines of 11% and 13%, respectively, from their peaks this year. Effective risk management is crucial for surviving the altcoin bear market, with token unlocks and unfavorable liquidity indicators being key catalysts of the crash.
Experts have warned of a potential further decline in altcoin prices due to the unlocking of nearly $2 billion in tokens expected before July. Venture capital funds, which invested $13 billion in altcoins in the first quarter of 2022, are under pressure to sell tokens as investors seek returns. The situation is exacerbated by growing investor interest in artificial intelligence (AI).
Despite the current challenges facing altcoins, some analysts believe that an altcoin season may be on the horizon. Traders are advised to monitor the ETH/BTC price ratio, as a growth in this pair is typically seen as a sign of increased capital flowing into alternative cryptocurrencies. Technical Analyst Titan of Crypto has also expressed optimism about the upcoming altseason, suggesting that the altcoin market is poised for significant growth following the BTC halving.
In conclusion, the altcoin market is currently experiencing a tough period due to large token unlocks and market volatility. While challenges persist, there is optimism for a potential altcoin season ahead, with traders advised to carefully monitor market trends and exercise effective risk management strategies.