Venture capitalists (VCs) who seek profits are detrimental to the long-term viability and price movement of newly-launched cryptocurrencies, according to Route 2 FI, a well-known crypto analyst. In a post on April 22nd, the analyst explained that while VCs bring in new liquidity for altcoin launches, they also introduce significant selling pressure that harms the token’s long-term price performance.
One of the main issues with the current trend of token launches is the high initial fully diluted valuation (FDV), which promises generous airdrop allocations for early adopters but also includes substantial unlocking schedules for early VC investors. This mechanism ultimately leads to a decrease in price for most of these new tokens.
According to Route 2 FI, the total market capitalization of altcoins, excluding Bitcoin (BTC), was $1.05 trillion at the time of writing, marking a 38% increase year-to-date from $760 billion at the beginning of 2024, as per TradingView data. The analyst pointed out that the problem with large VC unlocks is the lack of demand from crypto investors, as they are unable to absorb the significant increase in a coin’s circulating supply and the resulting selling pressure.
Historically, altcoins have experienced a surge after Bitcoin reaches new highs, as profits from Bitcoin sales are reinvested in other cryptocurrencies. However, with the existence of over 300 decent projects, there is currently not enough liquidity for all the top altcoins to simultaneously rise in value. This could potentially signify the end of the altcoin season trend, according to Route 2 FI.