This time around the cryptocurrency landscape is in the midst of an Altcoin Explosion, creating a breakneck pace that is revolutionizing market dynamics. Even though the altcoin count officially tracked on CoinMarketCap is just 13.24 million, the real number is well over 36 million. This is exponential growth at its finest. Meanwhile, a change in market calculus makes it difficult for fundamentally-sound projects to float and deepens fears of market dilution.
The Altcoin Explosion
Altcoins are on fire at the moment, an incredible turnaround from the 2017-2018 Initial Coin Offering (ICO) era. In those days, utility was really all that developers had to focus on. At that time, the entire ecosystem of altcoins that were being tracked was only about 3,000 coins. Joking aside, today there are more than 13 million different types of altcoin in circulation. In reality, this number is likely grossly underreported, due to the very low barrier to entry to mint tokens!
In addition to the growing popularity of DOGE and SHIB, the Solana (SOL) blockchain has quickly increased as a platform for memecoins, adding to the memecoin bonanza. With the evolution of creating a memecoin becoming easier than ever, sometimes as simple as just posting out a meme, this is bound to happen. Protocols today offer user-friendly solutions with very few clicks to have users launch a token. That convenience has created a monster of largely unvetted assets pouring into the marketplace.
Market Shift and Challenges
The crypto industry is changing rapidly. It’s a shift from tech innovation to going all in on influencer marketing and community-based growth. The transition has hit altcoins hard, even those with strong fundamentals, as well as presenting a huge opportunity. These altcoins find it hard to compete with memecoins that offer get rich quick schemes. This corporate prioritization of short-term earnings at the expense of sustainable value creation has contributed to a turbulent and erratic market landscape.
Altcoins have a unique role within the web3 ecosystem, providing different features and investments. Here’s the catch though, the incredible number of new tokens being created is watering down the entire value proposition. This year alone, investors will realize as much as $70 billion in value from altcoins that are now vested. This continued influx will deny continued diluting market valuations.
Implications and Future Outlook
The deluge of new altcoins paired with the shift to a more speculative, trading mindset creates new risks for investors. The absence of robust vetting and focus on quick returns breeds ripe opportunities for scams and fiscally irresponsible projects. This means that all investors should be especially careful and do proper research before investing in any altcoin.
The long-term effects of this altcoin boom are still up in the air. Because some projects really do bring groundbreaking innovation and value. Yet most will likely fade into graveyard status, leading to substantial returns losses for investors. The market needs to encourage innovation, but responsible issuance of tokens. Finding this balance is a good practice that goes a long way toward establishing credibility and sustainability.
