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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

This Is The Biggest Issue With Altcoins This Cycle: Crypto Analyst

Jake Simmons
Jake Simmons
1 year ago
3 mins read
Crypto altcoins news

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In a thread on X, Miles Deutscher, a renowned figure in the crypto analysis sector, has dissected what he views as a critical flaw in the current altcoin market. Addressing his extensive following, Deutscher elaborated on the impact of the rapid increase in the number of new crypto tokens, an issue he believes to be at the core of the altcoins’ underperformance in this cycle.

The Proliferation Of Crypto

Since April 2024, the crypto landscape has witnessed the introduction of over 1 million new crypto tokens, with a notable half of these being memecoins created primarily on the Solana network. According to Deutscher, the ease of deploying these tokens on-chain contributes to an inflated token count but highlights a deeper issue of market saturation and dilution.

Deutscher elaborates, “We now have 5.7 times the amount of crypto tokens than we did during peak bull in 2021. This is a major reason why crypto has been struggling this year, despite Bitcoin hitting new all-time highs.” He likens the excessive issuance of new tokens to inflation, where “the more tokens that launch, the more cumulative supply pressure on the market.”

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The analyst also sheds light on the dynamics of venture capital (VC) investments in the crypto space, noting the largest quarter for VC funding peaked at $12 billion in Q1 2022, just as the market began to turn bearish. Deutscher criticizes the timing and strategy of VCs, suggesting that while their capital injection is essential for project development, it often leads to market imbalances.

“VCs, like retail investors, are opportunists. Their investment timing often aims to maximize returns rather than support sustainable project growth, contributing to cyclical peaks and troughs in the market,” Deutscher explains. He continues to discuss the subsequent market effects, where projects delay launches in unfavorable conditions, only to flood the market when sentiment turns, worsening the dilution.

The constant introduction of new tokens not only strains the market’s liquidity but also affects investor confidence, especially among retail investors. Deutscher emphasizes, “The skew towards private markets is one of the biggest and most damaging issues in crypto, especially compared to other markets like equities and real estate.”

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This environment creates a barrier to entry for new liquidity and leaves retail investors feeling sidelined, a sentiment exacerbated by high-profile failures like LUNA and FTX. Deutscher argues, “If retail investors feel like they can’t win, they won’t play the game, which is why memes have dominated this year—it’s the only meta where retail feels like they have a fighting chance.”

Looking forward, Deutscher proposes several strategies to mitigate these issues. Exchanges could enforce better token distribution standards and prioritize larger community allocations. Additionally, adjusting the percentage of tokens unlocked at launch could help manage sell pressure more effectively.

“Even if the insiders don’t enforce change, the market eventually will,” Deutscher asserts. He suggests that exchanges should adopt rigorous standards for listing new projects and be equally stringent about delisting those that fail to meet ongoing criteria, thus preserving market integrity and liquidity.

In his closing remarks, Miles Deutscher hopes his insights will foster better understanding and prompt a reevaluation of current practices. “Dispersion isn’t the only problem, but it certainly is a major one—and something that needs to be discussed more openly to foster a healthier crypto ecosystem.”

At press time, Ethereum (ETH) traded at $3,562.

Ethereum price
Ether price holds above the 0.618 Fib, 1-week chart | Source: ETHUSD on TradingView.com
Featured image from Shutterstock, chart from TradingView.com
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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

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His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

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