Crypto Hedge Fund: Altcoin Investors Should Panic

Author: Thomas Carreras Source: DLNews Translation: Shan Ouba, Golden Finance

Lekker Capital told DL News that the crypto market may be about to face difficult times. Reduced demand, increased supply and changes in market structure are particularly severe for altcoins. The crypto market is on the verge of a serious wave of liquidations.

According to Quinn Thompson, founder of crypto hedge fund Lekker Capital:

"Most altcoins are expected to be eliminated," Thompson said. "The market seems to have lost its ability to rebound, even among major currencies, while leverage and open interest remain high."

Thompson told DL News that the introduction of Bitcoin spot exchange-traded funds (ETFs) has changed the structure of the crypto market.

In previous bull markets, small-cap cryptocurrencies benefited as traders became bolder after money flowed into Bitcoin and Ethereum.

But today, investors who get exposure to Bitcoin through ETFs have a hard time easily buying other altcoins besides Bitcoin in their brokerage accounts.

“Quite simply, there is a lack of demand to support the growth in altcoin supply of about $3 billion per month over the next one to two years,” Thompson told DL News.

“Just like in the stock market where some stocks do well and some do poorly, the same is true here, and the differentiation will continue to increase, not decrease,” he added.

More supply, less demand

Thompson noted that ETF inflows are decreasing and venture capital funds are raising funds by selling their cryptocurrency holdings. Stablecoin supply — sometimes used by traders as a measure of demand — has also peaked.

“Despite multiple attempts to break out above its all-time high, Bitcoin has been unable to muster enough strength,” Thompson said.

The reduction in demand could particularly affect altcoins, Thompson said, as many crypto projects unlock their token supplies.

In other words, project teams and their investors will increasingly have access to reserves of tokens that they have been unable to sell until now. And new buyers are now unlikely to step in to cushion the blow.

“As we head into an already low-volume summer, significant token supply unlocking and selling pressure from venture capitalists will likely act as a formidable headwind that most tokens will struggle to deal with,” Thompson said.

“There’s no panic yet,” he added. “But I expect that will change.”