Altcoins Face Liquidity Strain as Bitcoin Advances, Says CryptoQuant

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Ki Young Ju characterized the altcoin market, in several online discussions, as a “competitive scenario where one participant’s gain is another’s loss,” which seems to trail behind as Bitcoin‘s total market value escalates.

In his most recent report, Ki Young Ju noted that although Bitcoin’s value has significantly increased since 2021, the total market cap of altcoins is still lower than its previous record high. He explained this discrepancy by suggesting that capital is shifting from one altcoin project to another instead of being invested in new projects. In a recent post on X, he stated, “Only those altcoins with robust use cases and compelling narratives are likely to persist.

Ki Young Ju’s recent comments further elaborate on the position he expressed on December 3, 2024, in which he suggested that traditional explosive “alt seasons” as seen in previous market phases are unlikely for altcoins. Initially, he described the situation as peculiar and complex, urging investors to be cautious since only a select few altcoins would attract significant investment. In his opinion, while overall market optimism remains strong, there is still a discrepancy between this positive sentiment and actual capital flow into altcoins.

Bitcoin’s Paper-based Layer 2 Ecosystem

The analyst highlighted that Bitcoin is creating its own “paper-based secondary network,” consisting of exchange-traded funds, institutional investment funds, and publicly listed companies. As explained by Ki Young Ju, these financial instruments enable conventional investors to invest in Bitcoin indirectly, without having to directly engage with the cryptocurrency market. Consequently, a growing amount of Bitcoin’s liquidity is being confined within ETFs and fund frameworks, potentially limiting altcoins from capitalizing on Bitcoin’s price surge.

Ki Young Ju proposed an interesting point: the traditional relationship between Bitcoin and other cryptocurrencies (altcoins) seems to have changed. In the past, altcoins would mirror Bitcoin’s price fluctuations, but now they are experiencing a different scenario: “The pattern of altcoins moving in unison due to their correlation with Bitcoin has been disrupted,” he penned down. He pointed out a select few altcoin projects that have recently shown independent growth, driven by their ability to draw new liquidity on their own.

Altcoins Will Struggle To Stay Relevant

In the future, Ki Young Ju suggested that altcoins have two significant strategies to remain competitive. The first option is mimicking Bitcoin’s path by developing “paper representations” of their assets, enabling potential institutional investment and access to regulated financial services. The second strategy involves constructing a “genuine Internet money ecosystem,” using stablecoins or Bitcoin as a foundation for practical applications. Ki Young Ju emphasized that, regardless of the chosen route, altcoin developers should prove their worth and inspire investor trust by showing tangible value and building confidence.

Ki Young Ju mentioned that investors of altcoins should locate a coin that either exhibits unique innovation or holds potential for long-term investment. Given that the total value of altcoins has yet to surpass its all-time high, numerous experts suggest that progress rather than temporary market fluctuations will shape the future. At present, the focus seems to be on Bitcoin’s institutional development, while altcoins are competing for sustainable solutions and additional funding to establish a lasting position in the rapidly advancing digital assets sector.

In other words, if you’re an investor questioning which crypto to purchase at present, the response tends to be complex. One approach could be to just buy Bitcoin alone, considering the risk in choosing from the numerous alt coins that might surpass Bitcoin’s performance. This, essentially, is the straightforward option – Buy Bitcoin, and those who invest in alt coins may discover this lesson the hard way.

The Set and Forget Bitcoin Investment Strategy

Fred Thiel, head of Marathon Digital Holdings (MARA), advises Bitcoin investors to employ a straightforward, long-term investment tactic. In an interview with FOX Business on January 2, he emphasized Bitcoin’s durability, pointing out that the digital currency has seen annual price drops in only three out of the past 14 years. Thiel encourages regular investors to take a “buy-and-hold” stance, suggesting they should regularly set aside some funds for Bitcoin and then forget about it, as over time it tends to increase in value.

It’s reasonable to adopt a long-term strategy for investing in Bitcoin. That is, if Bitwise’s prediction about Bitcoin’s price reaching $200,000 by 2025 proves accurate.

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2025-01-11 15:56