Author: Crypto, Distilled, encryption KOL

Compilation: Felix, PANews

Tl; TL;DR: Reasons include project saturation, Token gluttony, increasing market intelligence, and Bitcoin ETFs breaking the traditional alt season path.

After Bitcoin Halving alts flying together is the "law" of the previous Bull Market, but the current highly anticipated "alt season" has not yet appeared. Encryption KOL Crypto, Distilled analyzes the reasons for this phenomenon and provides investors with suggestions for optimizing strategies.

What is "alt season"?

When altcoins outperform Bitcoin, the price spike across the board is alt season. This is a period when the alt market has entered a booming period driven by optimism, like a pump of water. The alt season has driven almost all tracks, and the influx of liquidity into the market is its driving force.

Liquidity tracking

Historically, liquidity has come from two main sources:

• Retail funds flowing in through CEXs
• Outflow from Bitcoin on CEX to altcoins on CEX

Liquidity then flows down the market capitalization ranking "ladder". The OGs are well aware of this dynamic and often refer to it as the "alt season road."

Lalapalooza effect

The "road to alt season" in 2021 was clear, but now it is gone. The authors believe that the cause is longer and is the result of several factors.

The power of a single factor is not enough to change longest things. But when they are combined, exerting influence in the same direction, the effect is enormous. Charlie Munger, a well-known investor, described this effect as the "Lalapalooza effect". (Note: The Lalapalooza effect refers to the effect of longest interrelated co-directional factors superimposed to produce a strong amplification effect)

So what impact does the combination of longest factors have?

1.Project saturation

Although the market liquidity is abundant, the project is extremely saturated. Imagine that there are longest boats in the sea than waves.

Only certain fields, such as the AI field or the SOL ecosystem, will feel the real wave of the "alt season". What was once a "pumping boat" has evolved into a selective rotation game, similar to the PvP nature of the Hunger Games movies (project interrolling).

2. Token Dilution: Invisible "Handbrake"

Token dilution (especially from Token unlocking) killed a alt season like 2021. This often-overlooked factor absorbs a lot of liquidity. No matter long how good the technology of the project is, if there is an oversupply, it is difficult to pump the price.

Some community users @thor_harvisten conducted a sample survey of the Token that have been online so far in 2024. The average circulation rate (Circulating Supply/Supply) of these project Tokens is about 14%, and there are about $70 billion of Tokens waiting to be unlocked.

What happens when project oversaturation is combined with an oversupply of tokens? The alt season is unsustainable.

3. Increased adoption is a double-edged sword

Increased adoption in traditional areas is both a good thing and a bad thing. On the one hand, it enhances the credibility of Crypto Assets; on the other hand, it also makes the field more sensitive. If the more long Satoshi Mingren switch to Crypto Assets, then it will be more difficult to find opportunities in the industry.

4. Bitcoin ETFs: What's New

The approval of the Bitcoin Spot ETF has changed the landscape of alts. Before the advent of ETFs, the main access channel for Bitcoin was through CEXs. This is a good thing for altts, and investors can easily switch from Bitcoin to try altts.

This time, the buyer is different. For those who buy Bitcoin through an ETF, the path to the alt market is not so straightforward.

5. Impact of the pandemic

Why is 2021 so unusual for alts? In the lockdown environment, the flow of funds and the time spent on the screen are very high, creating the perfect conditions for Crypto Assets to attract retail investors.

Given the rarity of this situation, it is reasonable to consider 2021 as an outlier. Everyone is still basking in the high tide of 2021, but the pomp and circumstance are no more.

Here's a quick summary of the reasons why altcoins "disappeared":

1. The alt market has changed from a rapid pump to a rotating game
2. As market intelligence continues to improve, finding opportunities requires more long effort
3. Project saturation, coupled with oversupply, is depleting liquidity
4. Due to Bitcoin ETFs, the traditional alt season path is broken

So in the current market environment, how should users respond:**

1. Pay close attention to FDV estimates (FDVs and saturation rates.

2. Keep an eye on the development of ETFs and areas where institutions are heavily involved, such as RWA. Over the next few years, these may have different tracks and even more favorable dynamics.

3. In a market flooded with alt coins, don't just look at the dollar value of the project. Comparing alt valuations with Bitcoin valuations provides a more accurate assessment of alt strength.

4. Work harder to gain an advantage. It's not just about increasing assets, it's also about improving knowledge, skills, and connections.

Epilogue

There are plenty of opportunities in the encryption market, but they require more long effort and fresh perspectives. The situation changes quickly, and those who can adapt quickly are more likely to succeed.

Related reading: Interview with Shenyu: The main incremental funds enter from ETFs, and there may be no alt season in this round of Bull Market