Squeeze from the interesting thread by Miles Deutscher.
Lately everyone has been asking the question:Why isn't viola growing?". Here and now we will talk about the most global problem in crypto, which leads us to what we are currently seeing in the market.
Let's go back to 2021. See pic.
New liquidity is entering the market in huge quantities, mainly through retail. Venture capitalists are also beginning to pour tens of billions of dollars into this area, giving investment to new projects in the private market.
Interestingly, the largest quarter in the history of venture capital funding ($12 billion) had to for the first quarter of 2022.
Low barriers to entry combined with the high growth potential of the bull's cryptocurrency have made Web3 a favorable environment for new startups. New tokens appeared in an endless stream, causing the total supply of crypto tokens to triple between 21 and 22.
But soon everything went downhill, starting with LUNA and ending with FTX. The market was completely empty. So what was left for all the projects to do? That's right, put it off, because launching a project in the middle of a bearish period is a death sentence.
A year and a half later, the situation has changed dramatically, and many projects were able to launch their tokens on better conditions. However, new projects also took advantage of the situation, as a result of which a historic number of new launches were recorded in 2024. More than 1 million new tokens have been launched since April alone, and there are now 5.7 times more of them on the market than during the bull run in 2021. See pic.
This is one of the main reasons why the cryptocurrency is struggling this year despite $BTC reaching new ATHs. Why?
Variance of alts is the cryptocurrency version of inflation. The more tokens that are launched, the greater the cumulative supply pressure in the market. There are no new investments, and this pressure is increasing like a snowball. Current estimates indicate that the new supply pressure per day is around $150-200 million.
There is a dire need for more liquidity in crypto. There are many venture capitalists, but the bias towards the private market is one of the biggest problems in crypto, as opposed to stocks and real estate.
Why do you think memes have dominated this year? This is the only area where retail feels like it has a chance to succeed.
Since the price discovery of many of these already high FDV coins occurs in private markets, there is no chance for public trading to rise by 10x, 20x, or 50x like venture capitalists.
In 2021 we could launch tokens and actually reach 100x. In this cycle, tokens are already starting at prices of $5, $10, $20 billion+ and leave no room for price determination on the open market. And then they bleed and bleed and bleed as their unlocks start hitting the market.
Even if insiders don't push for change, eventually the market will. The market will always self-correct and adapt, with the diminishing effectiveness of the current meta+ public response likely to impact the situation in the future.
The market should give retail a reason to come back. This solves half the problem. Be it a $BTC pump, $ETH ETF or some kind of macro shift. There are many potential catalysts.
We are monitoring the situation...
