The Altcoin Bear Market: A Harsh Reality for Most Traders

Institutional Crypto Research Written by Experts

👇1-14) Today’s title resonates with everybody who traded altcoins in 2017 or 2021. We analyzed 115 coins; the average crypto coin is already down 50% from the 2024 highs. As we explain below, those losses will be more severe unless crypto liquidity improves. Bitcoin (-11%) and Ethereum (-13%) are holding up well and are likely benefiting as smarter traders switch out of altcoins and into those two – this happened during the last two cycles.

Top 115 tokens - drawdown from 2024 highs (Bitcoin only -11 %)

👇2-14) Surviving the altcoin bear market hinges on one crucial factor: effective risk management. Token unlocks, and unfavorable crypto liquidity indicators are the primary catalysts of this altcoin crash (see yesterday’s report).

👇3-14) On May 8, we issued a warning, ‘Beware of Token Unlocks. Will Venture Capital Funds cut this Altcoin cycle short?’ as “a rapid succession of nearly $2 billion of token unlocks during the next ten weeks could lower the market for altcoins.” A central argument was that Venture Capital funds invested $13 billion in Q1 2022 while the market turned into a steep bear market. Those funds are now under pressure from their investors to return capital as AI has become a hotter theme.

👇4-14) Today, altcoins are in a brutal bear market. In 2024, 73% of those 115 coins peaked in March. We have been correct in calling for Bitcoin's outperformance against everything else, notably Ethereum, but in early March, the game changed. What was so unique about March, and what has changed?

17% (LHS) of the 115 largest tokens peaked on March 14 (now 100% seeing drawdowns RHS)

👇5-14) In early March 2024, Bitcoin reached our potential year-end target of 70,000. Last year, we accurately called for a 45,000-year-end target in 2023. In October 2022, we also correctly predicted a Bitcoin rally to 63,000 into the 2024 halving. Higher targets (125,000) can be derived quantitatively, but shrinking crypto market liquidity (forget M2) is holding the market back.

👇6-14) On March 8, we turned cautious and tried to buy tactical potential breakouts above 70,000 but using 68,300 as our ‘line in the sand’ stop level. After all, we are traders. When Bitcoin declined below 60,000, we lowered this line in the sand to 62,000 as a re-entry ‘buy’ level in case our 55,000 target fell short [May 3].

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