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Quinn Thompson, founder of cryptocurrency hedge fund Lekker Capital, made important evaluations about the future of altcoins. Thompson warned that the crypto market is on the verge of a major liquidation wave.
Thompson stated that he observed that in an environment where leverage and open positions in the market remain at high levels, the ability to bounce back decreases even in large cryptocurrencies. These observations form the basis of his liquidation wave warning.
Stating that the launch of Bitcoin spot ETFs has radically changed the structure of the crypto market, Thompson stated that in previous bull markets, capital flowed from Bitcoin and Ethereum to smaller cryptocurrencies, but in the current situation, the landscape has changed dramatically. He noted that investors who were exposed to Bitcoin through ETFs now have difficulty purchasing altcoins or cryptocurrencies other than Bitcoin from their brokerage accounts.
Thompson explained that there is a lack of demand that will support altcoin supply inflation of approximately $3 billion per month over the next one to two years. The analyst predicts that a similar distribution will occur in the crypto market, just as some stocks perform well in the stock market while others decline, and states that this distribution will continue to increase rather than decrease.
Expressing concerns about the decrease in ETF inflows and risk funds increasing capital by selling crypto assets, Thompson said that the supply of stablecoins, which traders use to measure demand, has also reached a plateau. “Despite numerous attempts to break all-time highs, Bitcoin has failed to gather strength,” Thompson said, predicting that the stagnation in demand will hit altcoins particularly hard.
According to Thompson, many crypto projects will unlock tokens, giving project teams and investors access to coins that were previously blocked from sale. New buyers are unlikely to alleviate this situation. Therefore, the combination of significant token supply unlocks and selling pressure from venture capitalists will create huge pressure for most tokens.
“There is no panic yet, but I expect that to change,” Thompson concluded.
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