Recent data reveals a significant capital influx into the altcoin market, with its total capitalisation increasing by more than $200 billion in just two weeks. This growth is quantitatively similar to the surge in October—November 2021, which marked the peak of the last bull cycle.
However, a significant difference exists between then and now. The 2021 period was characterised by widespread euphoria and exponential returns for many assets. Lots of the alts gained 5000% or even 10000%. In contrast, the current market sentiment remains subdued, with most altcoins posting relatively modest gains of 100—200% from their lows.
The primary reason for this discrepancy is the fundamental structure of the current market. The number of tokens in circulation has expanded dramatically compared to the previous cycle. According to data on CoinMarketCap, the total number of cryptocurrencies is approximately 19 million, where around 15 million of them are created in the past year. In the past month, around a million tokens are created.
Although the aggregate altcoin market cap is growing, this new capital is now distributed across a vastly larger and more fragmented landscape of assets. The increase in market cap is definitely disproportionate, compared with the growing number of altcoins. This dilution effect supports a more conservative outlook.
In the past, ETH-beta always over-performed ETH. We are not seeing this in the current cycle. This rally isn’t driven by on-chain traders but by off-exchange big institutions instead. Tokens like PEPE are already lagged back. Even the big-name L2’s barely managed to catch up with ETH’s gains. In this situation, possibly only a select number of tokens will likely to accumulate enough capital and break their ATHs.
The continued capital influx would certainly continue to drive the price up, but I doubt if we’ll still see an altseason, with crazy parabolic growths on a vast range of altcoins, as we did four years ago.
Stay curious and cautious!
Until next time.