Altcoin Market Faces Winter Chill as $58 Billion in Tokens Set to Unlock Amid Dwindling Demand

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The altcoin market, akin to a chilly winter in the crypto landscape, is bearing witness to an accelerating sell-off. Early bird investors and project founders are rushing to unload their tokens amid a complex cocktail of factors. This downward trajectory, according to a recent analysis from Bloomberg, can be traced back to the unlocking wave of tokens held by venture capitalists (VCs) and founders, coupled with the persistent selling pressure fuelled by the intricate correlation between altcoins and dominant network tokens.

As we observe the crypto market bounce back from its steep downturn two years in the past, numerous project tokens have met their unlocking deadlines this year. These tokens, initially received by venture capitalists and founders as quid pro quo for investments or labor contributions, are now temptingly ready for sale.

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A staggering 120 out of the 138 tokens under the watchful eyes of TokenUnlocks researchers share the timeline for unlocking this year. Their combined market value amounts to an approximate total of $58 billion. This potential wave of selling from these liberated VCs has inadvertently sparked a sequence of downside price reactions from non-VC holders. Tormented by the pressure to sell prematurely, they are frequently caught in the undertow of substantial price discounts.

The aftershocks of token unlocks have notably distressed the price performance of DYDX, Avalanche (AVAX), and Pyth (PYTH). Since mid-March, the token price of DYDX has more than halved, while AVAX and PYTH haven’t been spared the suffering either, recording similar plunges. Adding fuel to the fire, these three tokens were earmarked for unlocking in May, subsequently amplifying the selling pressure.

These token unlocks, once lauded as the essential engines propelling the prices in 2023, have now stepped into the spotlight under the intensified scrutiny of VCs and public participants. They are tipping the balance in favor of short-term profits, relegating long-term holdings for altcoins with unlocks to the backseat.

Interestingly, dating back to March 14, when Bitcoin hit an unprecedented high of $73,700, research shows that only 12 of the top 90 non-stablecoin assets tracked on centralized exchanges have yielded positive returns. In contrast, a staggering 81 have recorded negative returns. Bitcoin has tumbled around 12% following its peak, with most of the top 100 tokens recording a downturn surpassing 25%.

In the face of a plummeting market, smaller altcoins, particularly those entwined with major network tokens such as Ethereum (ETH) and Solana (SOL), are the first to feel the impact. The ripple effect of token unlocks bolsters this selling pressure, sending further shockwaves through the altcoin market.

Given this climate, Bloomberg highlighted the harsh conditions faced by infrastructure projects that emerged during the bear market phase. As these projects initiate their token release, demand from regular buyers at elevated prices appears constrained, painting a sobering picture of an altcoin market marked by a dearth of liquidity and an excess of tokens on the cusp of unlocking. This dynamic feeds into a downward spiral, dragging prices down with it.

In conclusion, the total crypto market capitalization has taken a hit and plunged to $2.19 trillion.