Crypto analyst Miles Deucher recently presented his opinion on a “fundamental drawback” that leads him to believe that altcoins are lagging behind in the current market era.
In a publication on Twitter on June 18th, Deucher explained that the problem is related to the mass financial influx of venture capital (VC) into the crypto space in 2021, which has recently surged again.
He believed that the launch of something new from this wave of VC funding has caused a significant growth in all new crypto startups. “The total volume of crypto tokens has tripled between 2021 and 2022,” he said. Following the subsequent bear market, many companies postponed the launch of their cryptocurrencies. For Deucher, “launching a project in bear market conditions is equivalent to a death sentence.”
After the market started to rise again in the autumn of 2023, the postponed projects were launched and flooded the market to a large extent. He also noted that “in just the last two months, various individuals have created over 1 million new coins.” The significant issuance of new tokens has led to what he describes as “altcoin dispersion,” similar to hyperinflation in traditional economies. He also explained, “If more tokens are created, it reduces the purchasing power of the cryptocurrency compared to other currencies (like the US dollar).”
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Continued selling pressure, combined with the lack of fresh capital in the market, has resulted in altcoins significantly underperforming BTC.
The analyst also warned that retail investors are being discouraged from the market because they feel they cannot win. He stated, “The distortion of private markets is one of the biggest (and most damaging) problems in crypto, especially compared to other markets like stocks and real estate. This distortion becomes a problem because retail traders feel they cannot win. And if they feel that way, as if they can’t win, they won’t participate in the game.”
New projects often launch with high market capitalizations, leaving limited room for price discovery and slowly draining capital as private investors unload their tokens.
However, Deucher believes that the future of the crypto market is certainly bright despite these difficulties. He is convinced that “the market will always self-correct and adapt” and that a more favorable market for retail trading will benefit everyone.