- Analyst Miles attributes the current altcoin underperformance to increased altcoin dispersion.
- During the 2021 bull run, venture capitalists invested heavily in new crypto projects, leading to a surge in tokens.
- Proposed Solutions: Deutscher suggests exchanges enforce better token distribution.
Crypto analyst Miles Deutscher warns of a growing issue within the cryptocurrency market: altcoin dispersion. In a recent X (formerly Twitter) post, Deutscher identified this phenomenon as a major driver of altcoins’ underperformance, noting that a solution remains elusive.
In 2021’s bull run, the crypto market experienced a significant surge, driven primarily by fresh liquidity. During this phase, venture capitalists (VCs) invested heavily in new projects, benefiting from the favorable market conditions. Deutscher explained that this influx of funding was a “natural capitalistic response” common with VCs. He stated:
“For those who don’t understand private markets, put simply, a VC will invest capital into a project at an early stage (typically 6 months – 2 years prior to launch), at a typically lower valuation (with vesting attached),”
The low entry points and potentially high return on investments (ROI) led to a spike in new crypto startups. Between 2021 and 2022 alone, the total number of crypto tokens tripled from 443,513 to 1,149,763, increasing further to 2,522,209 in 2024. This surge in tokens has increased market supply pressure.
Deutscher emphasized the need for more liquidity in crypto, highlighting the skew towards the private market. Unlike VCs, who benefit from early-stage investments and potential high returns, retail investors struggle to achieve significant gains.
In 2021, retail investors could potentially achieve high returns on new tokens. However, in the current cycle, most new tokens launch with high valuations, leaving little room for price growth.
Deutscher proposed several measures to address the persisting issue. The analyst urged exchanges to enforce an improved token distribution strategy and delist dead projects to free up valuable liquidity.
Additionally, project teams could prioritize community allocation and increase polls for genuine market participants. Moreover, higher percentages of tokens should be unlocked at launch, with mechanisms to deter price manipulation.
Despite the current challenges, Deutscher believes the market will eventually self-correct through positive catalysts, such as a Bitcoin price surge, an Ethereum ETF approval, or macroeconomic shifts.
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