Breaking Crypto News – What Are Common Pitfalls Altcoin Investors Face in High Market Conditions?
Breaking Crypto News – For those who bought into the two biggest digital assets, the cryptocurrency market is currently seeing a good correction following a sharp rise from October to March. Though the atmosphere in crypto social media circles resembles bear market pessimism, for people who hold fewer cryptocurrencies, this is a painful correction. The decline in altcoins was caused by a combination of factors, including selling pressure from venture funds with expanding supply token unlocks, a lack of new inflows into the industry, and seasonal tendencies.
Due to unlocks and distributions planned years in advance, the quantity of tokens for several altcoins is continuously dilutionary. This is due to the fact that the majority of tokens are either reserved for grants and ecosystem growth, purchased by early investors, or locked up. For instance, despite a significant increase in supply, the market capitalization of the Ethereum layer-2 network Arbitrum’s token (ARB) has increased from $1 billion to $2.5 billion, yet it is almost back to its all-time low price from September of last year.
Unlike equities which have a constant passive bid from ETF inflows and bond buybacks, crypto, and in particular altcoins, have the opposite – a constant stream of sell pressure,
Quinn Thomson, founder of Lekker Capital
Insufficient Demand to Cover Supply Shock
Markus Thielen, the founder of 10x Research, stated in research earlier this week that venture capital investors invested $13 billion in Q1 2022, during which time the market transformed into a severe bear market.
Those funds are now under pressure from their investors to return capital as artificial intelligence (AI) has become a hotter theme.
Thielen
There isn’t enough demand to counteract this supply shock when the market’s desire for more speculative, smaller crypto assets is waning and trade volumes are declining, as they have been over the past few months.
FAQ
What Causes Selling Pressure?
In a market where there are more sellers than buyers, selling pressure develops. Numerous factors, including a shift in the market’s perception, unfavorable press coverage about the company, or modifications to the economic landscape, may be to blame for this.
What is the Bear Market in Crypto?
This question lacks a definitive response. However, a bear market is usually indicated when asset prices fall by 20% or more and stay down for several weeks.
What Happens During a Supply Shock?
An unforeseen circumstance that modifies the supply of a good or service and causes a sharp shift in price is known as a supply shock. Whereas a negative supply shock causes prices to rise, a positive supply shock causes prices to fall by increasing output.
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