Why we might not see another altcoin season?

Source: Blockworks; Compiled by Tao Zhu, Jinse Finance

K33 believes that, unlike meme coins, altcoins may not make a comeback... at least not in the way we are accustomed to.

David Zimmerman from K33 wrote in a report that the cycle of 2020/2021 may have reached its peak.

"If there is no new retail capital inflow, it will become increasingly difficult for speculative tokens that have no income, no products, and no roadmap besides the hype to be profitable," he said.

In addition to the overall maturity cycle we see, a significant change is that the meme coin (memecoin) has truly established a foothold in the cryptocurrency space.

In other words: Since it's possible to invest in meme coins, why invest in narrative-driven tokens?

As I wrote last week on Milk Road, meme coins accounted for about 25% of the total trading volume in cryptocurrencies during the peak period of the first quarter.

This means that the future path of altcoins is more likely to be selective. As Zimmerman pointed out, the overall "altcoin market faces $4.3 billion in token unlocks in May, $2.8 billion in June, and $3.2 billion in July. These unlocks are headwinds that require a lot of new liquidity to absorb."

"With no significant surge in demand or new retail inflows, the calculation is simple: more supply facing static or shrinking demand equals downward pressure."

Besides the obvious demand for liquidity, times have changed. In the past, altcoins could gain a boost just by being close to trending topics. Now, there's a greater need to focus on fundamentals (I swear I’m not trying to bring this up all the time, it's just what's happening).

Zimmerman stated that Bitcoin will still dominate, but there is also an opportunity to allocate smaller positions to altcoins. While some altcoins may perform excellently, the 'window of opportunity is limited and increasingly short.'

As cryptocurrencies mature, tokens may not continue to be the big winners. Take stablecoins as an example.

"Currently, the most bullish crypto asset after Bitcoin is almost certainly stablecoins. They are making their way into payment infrastructure, with a continuously growing market cap, and positioning themselves at the center of retail and institutional use cases," said Zimmerman.

Among the many options, investors must now pay attention to indicators before investing in tokens (unless you insist on investing in meme coins). For K33, this means understanding product-market fit, user growth, or the token's earnings.

A more serious era of cryptocurrency is about to arrive.