The altseason anticipation has been met with disappointment as prices continue to drop, liquidity thins, and patience wears thin in the market.
Renowned analyst Darkfost has released a report highlighting a concerning trend in the altcoin space, indicating that over 40% of altcoins have either hit their all-time lows or are dangerously close to doing so.
This figure now exceeds the previous bear market’s peak of around 38%, showcasing the severity of the current situation compared to past downturns.
Darkfost points out the escalating geopolitical tensions and resulting market volatility, with altcoins bearing the brunt of the impact. They are the first to feel the fear and the last to recover, with many yet to show signs of recovery.
The altcoin market hasn’t just underperformed; it has effectively reset for a considerable portion of its assets, signaling a significant downturn rather than a temporary correction.
Unpacking the Structural Issues: The Overwhelming Number of Cryptocurrencies
Darkfost emphasizes a critical aspect missing from most analyses: the sheer volume of cryptocurrencies in existence, exceeding 47 million in total. This oversaturation, with Solana hosting 22 million, Base over eighteen million, and BNB Smart Chain with four million, has led to a dilution of liquidity never seen before in the market.
This liquidity dilution, spreading finite capital across an ever-growing number of tokens, has left altcoins exceptionally vulnerable in the current landscape.
Darkfost suggests that while extreme underperformance presents challenges, it also offers opportunities for investors willing to sift through the resilient projects from the irrelevant ones in a market flooded with millions of tokens.
The Altcoin Market’s Retreat: Evidenced by Chart Patterns
The total crypto market cap, excluding the top 10 coins, currently stands at $173.12 billion, showing a slight 1.88% increase for the week. However, this gain, against the backdrop of significant chart trends, appears more as noise than a true recovery.
The overall market cap has plummeted by 64% from its late 2024 peak, erasing all gains made that year and reverting to mid-2023 levels. This decline signifies the complete reversal of the altcoin bull run.
The downward trajectory is underscored by the breach of crucial moving averages, with the 50-week, 100-week, and 200-week MAs all trending downwards, indicating a significant market shift. The death cross between the 50-week and 100-week MAs further confirms the bearish sentiment prevailing in the market.
$173 billion currently acts as a precarious support level following the failure to sustain $190 billion. Should this level falter, the market could revisit the 2022 bear market low around $80 billion, highlighting the vulnerability of altcoins in the current scenario.
Image credit: ChatGPT, chart source: TradingView.com
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