A growing number of altcoins will lead to a spread of funds across projects, making it harder for the market to stay stable.
The altcoin market faces a tough road ahead as venture capital (VC) funding dries up. Reflexivity Research co-founder Will Clemente suggests that only a strong bull market can stop a prolonged funding shortage for altcoin projects. Without this rally, many projects may fail to attract enough funds, which will lower values across the sector.
Source: TradingView
VC funding in the altcoin market has dropped due to recent poor market performance. Analysts now question if altcoins can repeat the sharp rises seen in earlier market cycles. In his September 12 post on X (formerly Twitter), Clemente also expressed concerns about the growing number of these volatile assets.
You're missing my point lol, me tactically trading altcoins with my own money is not the same as crypto funds having the majority of their book, money raised by other people/funds, in some cases being locked up for 4-5+ years in alts, drastically underperforming.
— Will (@WClementeIII) September 11, 2024
Also not…
He believes that a growing number of altcoins will lead to a spread of funds across projects, making it harder for the market to stay stable. According to CoinMarketCap, there are more than 8,000 cryptocurrencies, adding to the market’s complexity.
Altcoin Market’s Performance Falls Behind
The weak performance of altcoins has worsened due to funds that mainly invest in these high-risk, high-reward assets. Clemente explained that too much capital flowed into funds that now consistently underperform market benchmarks. This trend has left many projects struggling for investment as returns drop across the sector.
Backing this view, Glassnode’s lead analyst, James Check, expressed doubt about a potential altcoin rally. On an August 29 podcast, he compared the situation to a joke that has lost its impact, suggesting that new investors are entering speculative trades too soon, which is affecting market behavior.
Despite this doubt, some experts hold a more positive outlook. Michael van de Poppe, founder of MN Trading, sees signs of upward movement in the altcoin market. On September 12, he noted that certain altcoins are gaining momentum. He predicts that September could signal the start of a slow recovery, with specific tokens surpassing expectations.
Feels strange, right?#Altcoins going up day after day.
— Michaël van de Poppe (@CryptoMichNL) September 12, 2024
Some particular ones are doing great, through which we're starting to show some momentum.
I don't believe September is going to be worse, I think we'll gradually accelerate upwards from here.
Additionally, the anonymous trader Mister Crypto expressed optimism by indicating that altcoins are undervalued and worth buying. This view reflects a growing belief among some traders that altcoins have dropped too low, creating a chance for investment despite the overall market decline.
Shift in Investor Behavior
Bitfinex analysts observed a clear change in how investors manage their portfolios. Bitcoin BTC $84 361 24h volatility: 1.3% Market cap: $1.68 T Vol. 24h: $12.59 B has faced challenges recently, but altcoins have displayed relative strength. This points to a growing trend of investors using altcoins as protection during uncertain market conditions. The analysts believe this shift could mark a new phase where these digital assets play a major role in diversifying and protecting capital in a volatile market.
Despite the challenges facing the altcoin market, the debate about its future continues. Whether the market will experience a strong recovery or more underperformance will lead to a long-term decline in venture capital funding remains to be seen.
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