Analysts say altcoins carry ‘relatively large’ risks as the days of big returns are behind them.
Crypto analysts say the high-risk, high-reward thesis for altcoins may be leaning towards the former, as the potential for big gains is now reduced by the weak narrative driving the cryptocurrency market.
“The tactical opportunity exists, but the days of 100x returns may already be behind us,” Markus Thielen, head of research at 10xResearch, told Cointelegraph.
He warned that despite the market predicting a bull market for altcoins this year, “retail participation remains sluggish and few new projects have emerged to captivate non-crypto traders.”
Thielen said that while altcoin bull markets in the past have had “distinct characteristics” of attracting more money, this cycle has seen “capital tightness, evidenced by low aggregate value pegs and a lack of venture capital investment.”
“Last cycle, the narrative that cryptocurrencies could replace traditional financial systems was widely accepted, but this cycle’s narrative is short-lived and lacks real support,” Thielen added.
Earlier this week, GameStop (GME), a Solana-based meme coin not affiliated with the video game retail company, saw GameStop’s stock price surge 2,727% after trader Keith Gill first posted the meme on his “Roaring Kitty” has risen. After almost 3 years.
MN Trading Consulting founder Michael van de Poppe argued in a May 16 X post that a portfolio holding primarily altcoins poses “relatively large” risk.
“What are the downsides of this bet? It’s relatively huge. “As soon as we posted, our overall investment had already dropped by about 20% in just a week or two.”
Despite the risks involved, van de Poppe recently sold all of his Bitcoin (BTC) to convert to altcoins, claiming he “could lose 50-80%.”
However, cryptocurrency investor Fabio Andreatta is skeptical that there will be an “alt season.”
Related: Altcoins will bottom in early summer before bull market — Analyst
“All you’ve done is increased the risk,” Andreatta said of van de Poppe’s X post. “It is highly unlikely that it will surpass Bitcoin. Most altcoins will never reach ATH again.”
Bitcoin’s dominance (market share relative to the rest of the cryptocurrency market) shows that the broader market has shifted capital away from altcoins.
According to TradingView data, Bitcoin dominance is currently at 56.05%, up 2.12% over the past seven days and approaching a yearly high.
magazine: Buy altcoins now, but sell them before ‘mid-2025’: Charles Edwards, X Hall of Flame
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.
