Why Won't the Altseason Happen?
The current bull cycle has market participants wondering when the long-awaited altcoin season will begin. The market is now experiencing key changes that could jeopardize the start of the new altcoin season.
Altseason is a period when the prices of alternative cryptocurrencies rise faster than Bitcoin. The altseason was first seen in 2017, when cryptocurrencies started to attract massive media attention. In the same year, many projects started launching ICOs, which also provoked the popularization of altcoins.
Since then, the cyclical nature of the altcoin season has been fixed in the market, and now market participants are eagerly awaiting the beginning of the new one. Except that the market dynamics are changing rapidly, which may jeopardize the start of the new altcoin season.
Why is the altcoin season in danger?
The main reason lies in altcoins as such. At the moment, the market is oversaturated with altcoins, and supply exceeds demand. Popular aggregators, such as CoinMarketCap and CoinGecko, do not track every single cryptocurrency. Their actual number is around 3 million. Over 500,000 new coins have been launched in 2024 only. And most of them are memecoins.
The oversaturation of coins on the market causes strong competition for investors' funds. As a result, the market creates fragmented liquidity. It is spread over too huge number of cryptocurrencies. Thus, individual coins struggle to hold investors' interest, prices do not grow, and the overall altcoin market dynamics become weaker.
80% of the recently launched coins have lost a lot of value and have failed to recover since launch. And just over 70% of coins launched as a result of airdrop in the current bull cycle fell significantly in price on the first day after launch.
Another reason is the behavior of investors, who themselves drove altcoins into a vicious cycle. Previously, in the same year of 2017, the only way to launch a coin was to go for an ICO. A few years later, the vast majority of such projects began to seek support from private investors and venture capital firms. The venture capital market grew dramatically and exceeded $11 billion by 2022.
Cryptocurrency projects have received significant support from major players, and venture capitalists have been able to buy their coins at a low price. However, herein lies a trap. Due to the huge flow of investment from the big players, the coins become very expensive by the time they are released, making them less attractive to ordinary retail investors.
Ordinary investors are left to turn to tokens that promise equal profit opportunities for everyone. Thus, in the last few years, coin launches have ceased to require programming skills or significant capital and millions of different coins, most commonly memecoins, have flooded into the market. Their goal is hype rather than utility, so they are inherently doomed to short-term success.
Thus, the market is oversaturated with new altcoins, but none of them are able to gain a foothold to support significant growth. This is evidenced by the fact that the altcoin market size has declined compared to the previous bull cycle. The figure has fallen 35% from $980 billion to $780 billion, and this is despite the fact that at the start of the current bull cycle a significant number of altcoins outperformed Bitcoin at times before its rally.
Will we witness an altcoin season?
Historically, liquidity injections have favored cryptocurrency prices. In the current bull cycle, retail investors have switched to memecoins and venture capitalist investments have fallen sharply. Traditional investors have emerged as a new source of liquidity, which would give hope for a quick start to the alt season. However, they are already invested in Bitcoin ETFs totaling $15 billion and don't seem eager to move into the cryptocurrency industry. In that case, a miracle would have to happen for liquidity to pour into altcoins and start the altcoin season.
There is a bit of hope that the altcoin season will begin after the launch of the Ethereum ETFs has borne fruit. However, with new crypto funds, the same situation as with Bitcoin ETFs may repeat itself: fresh liquidity will flow exclusively into Ethereum ETFs.
Some market experts believe that the altcoin season will not start until the Fed cuts interest rates. Others look at technical indicators and warn that the altcoin season is about to begin.
But whatever the predictions, in the changing landscape of cryptocurrencies, we shouldn't expect an altcoin season in the classic sense. The season will probably be short-lived in the future, affecting individual categories like memecoins in the current bull cycle. We've already seen something similar earlier this year.
Meanwhile, the market will continue to offer even more new coins, which will put the cyclicality of the altcoin season at risk.
