A cryptocurrency analyst stated that in order for cryptocurrency projects to continue to receive a large amount of venture capital, the altcoin market needs to experience a significant rebound.
Will Clemente, co-founder of Reflexivity Research, stated in a post on September 12 that unless there is a "significant bull market" for altcoins, funded cryptocurrency projects will decrease, leading to a decline in the overall valuation of the altcoin market.
Clemente expects the funds to be "diversified."
However, Clemente expressed doubt about the possibility of the altcoin market achieving this rebound.
He wrote, "With a large supply entering the market, I expect a situation of diversification, but I am uncertain whether this will occur."
In the past six months, the dominance of the altcoin market has decreased by 23.10% excluding the top ten cryptocurrencies. Source: TradingView
CoinMarketCap stated that it tracks over 8,000 cryptocurrencies, making it difficult to determine the "exact number" of existing tokens.
Clemente explained that a large investment in altcoins is considered a high-risk, high-return asset and has failed to meet market performance standards.
"My view is that too much capital is being invested in current funds, as most of the funds are allocated to 'beta' funds, which have clearly underperformed the benchmark."
Currently, traders and analysts are questioning whether the altcoin market will experience a rebound similar to previous market cycles.
James Check, Chief Analyst at Glassnode, believes that the situation will not develop as expected because new cryptocurrency traders are eager to prematurely purchase the most speculative assets.
"The joke is over, everyone knows the punchline, but they still go straight to the punchline, so it's no longer funny," Check said on the Rough Consensus podcast on August 29.
Traders Attempting to Outperform the Market
By analyzing the behavior of traders during the 2021 bull market period and comparing it with their behavior in 2024, Check stated that traders are attempting to outperform the market by quickly purchasing the most hyped memecoins.
During past bull markets, memecoins typically surged after the broader market rebounded, but this time, the rise of these assets is faster than ever before.
Check explained, "In 2021, we experienced all the bubbles, it was a beautiful waterfall of capital, from Bitcoin, Ethereum, L1, DeFi, all the way to monkey JPEGs." He pointed out that many native cryptocurrency holders now understand that the fastest way to make the most money is to "buy the dumbest tokens."
Other analysts remain optimistic
However, other cryptocurrency traders have a more optimistic outlook on the altcoin market.
Michael van de Poppe, founder of MN Trading, wrote in a post on September 12, "Some of them are performing very well, and we are starting to show some momentum."
"I don't think the situation in September will get worse; I think we will gradually accelerate from now on," van de Poppe added.
"Altcoins are undervalued. I'm buying," added anonymous cryptocurrency trader Mister Crypto.
Despite recent declines in Bitcoin, altcoins remain relatively strong, indicating that investors may be adjusting how to protect their capital during uncertain market conditions.
"This shift suggests a potential institutional change, as investors explore the value of altcoins, which is different from the typical pattern of flocking to Bitcoin during economic downturns."
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