Altcoins
Why are many Altcoins bad? It’s not because of Meme Coins, VC emphasizes
A new article from Haseeb Qureshimanaging partner at Dragonflychallenges popular narratives surrounding recent fall in altcoin prices.
What happened:Qureshi article questioned three popular theories regarding the underperformance of these altcoins: venture capitalists (VCs) and key opinion leaders (KOLs) abandoning the tokens, retail investors turning to meme coins and low circulating supply hampering price discovery.
Qureshi presented data that shows a significant decline in recent tokens listed by Binance, excluding explicit coins and tokens with prior token generation events (TGEs).
He used this data to disprove the first theory that VCs and KOLs sell tokens to retail investors.
“Every top venture capitalist that comes to mind has at least a year and a vest of several years before they get their tokens,” Qureshi said, emphasizing that these venture capitalists are still locked in, which makes the dumping theory implausible.
He then addressed the second theory, which suggests that retail investors are abandoning these tokens in favor of meme coins.
By comparing the trading volumes of these altcoins and even coins like Shiba Inu (CRYPTO: SHIB), Qureshi demonstrated that the chronology does not match.
“Memecoin mania was full of frenzy in March, but the basket emptied in April, a month and a half later,” he notes, arguing that this disconnect refutes the theory of an exodus of retailers towards coins.
The third theory posits that the low circulating supply of these tokens prevents meaningful price discovery.
Qureshi acknowledged that while low float can be problematic, it is not unique to the current market cycle.
He provided historical data showing similar circulating reserves in previous cycles and noted: “If this theory were correct, you should see coins with the lowest floats being punished, and the highest floats should be punished. behave correctly. But we don’t see a strong correlation. “.
Qureshi concluded that these popular theories fail to explain the underperformance of these altcoins.
Instead, he attributed the slowdown to factors outside the market, including geopolitical tensions in the Middle East, which affected market sentiment in mid-April.
“The market decided it didn’t want to buy them back,” he points out, suggesting that the broader market environment, rather than specific market structure issues, is to blame.
Looking ahead, Qureshi advised venture capital firms to exercise pricing discipline, exchanges to list tokens at lower prices with better lock-up conditions, and project teams to increase the Token offering from day one to improve price stability.
He reassured projects currently experiencing price drops, citing historical precedents where now-successful projects initially faced similar declines.
“Stay focused on building something you can be proud of and keep shipping your products. The markets will eventually realize that,” he encourages.
And after: For those interested in further discussions about digital assets and their market dynamics, Benzinga’s report The future of digital assets the November 19 event promises to be an informative platform.
Read next: Retail legend Roaring Kitty returns after three years: can he spark another frenzy?
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