Will there really be a "copycat season"?

Original title: "Some thoughts about altcoins"

Original author: ROUTE 2 FI

Original translation: Frost, BlockBeats

Editor's note:

This article explores the views on "alt season" and high FDV tokens from the perspective of investors, and indicates that some hedging strategies can be used to obtain profits.

We have heard a lot about "alt season", but this time I think things will be different. We are always used to hearing: "Under the right conditions, every coin will rise." But is this true?

Remember that there are many more "utility" tokens on the market today than in 2021. Now 3-5 "high-quality" tokens are added to the market every week, and everyone seems happy. But ask yourself, who will buy all these tokens. Unless institutions or retail investors come in in droves, it will just be PvP forever.

A recent example is the Wormhole airdrop. Launched at a 10 billion valuation. Now ask yourself why would you own it? I can't see any other reason other than pure luck.

I think when BTC trends lower and altcoins move more freely, there will be a few altcoins that will have ugly trends. Not everything is as people are used to. There are more people working in the crypto industry now than in the last cycle, but people are smarter now. I think we will blindly think that there will be sector rotation next, as we have been used to for the past 6 months, which may be a wrong idea. Thiccy claims that the altcoin sector has added $20B in supply through unlocking and staking rewards so far this year. At these prices, the average daily inflation of altcoins is $250 million. Altcoins have added about $200 million in value year-to-date, a 53% increase in market cap, while BTC is up 53% and Ethereum is up 45%.

FDV has grown faster than circulating supply, up about 70% year-to-date, as more projects launch tokens. The spread between FDV and circulating supply (representing the amount of future supply that will hit the market) has increased by more than $150 billion year-to-date. As inflows into mainstream coins slow, the weight of daily altcoin supply is becoming more and more apparent. The more I learn about trading, the more I realize that tactically shorting altcoins is a +EV move, but nakedly shorting altcoins in an uptrend can be dangerous.

Anyway, the total altcoin market cap is steadily increasing due to the constant new tokens being launched + new supply entering the market.

The example above includes some high market cap/FDV tokens. Look at WLD, it has a market cap of $1 billion, but a FDV of $64 billion. What does this mean?

It means there will be a constant supply of WLD coming to the market in the future. In July 2024, they will start a crazy sell-off with $6 million of WLD tokens being released to the market every day. For context, there are currently $181 million of WLD tokens on the market.

You don’t have to be a rocket scientist to understand that this is extremely pessimistic. It is easy to see with a basic supply and demand curve that it will be hard to keep the WLD price up when this kind of supply hits the market. Who is going to buy $6 million of WLD tokens every day?

Does this mean shorting altcoins?

Not necessarily, it just means that I think most of the new VC scam coins (high FDV coins) will eventually go crazy. You can take advantage of this in a pairing trade or if you want to hedge.

Right now just before the halving, it makes sense to go long BTC and short weaker coins. For example $STRK, $APE, $BOME, $ADA, $CRV, $XRP. Or, if altcoins in general outperform, combine these weak altcoins with strong altcoins:Currently strong altcoins: $ENA, $TON, $FTM, $PENDLE. However, market momentum changes by the minute, and this is not a recommendation to go long/short these coins right away.

The good thing about Memecoin is that they are actually one of the few honest coins left. Look at $WIF, $PEPE, $DOGE, etc. The circulating supply and total supply are the same. There is no huge unlock, it's just a contest between players.

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