Altcoin Season Delayed Due to Rise of On-Chain Meme Coins

Crypto analyst Miles Deutscher has identified the reason behind the delayed altcoin season, attributing it to the shift of speculative capital from major altcoins to on-chain low-cap meme coins. Deutscher’s recent post highlights the launch of Pump Fun, a platform facilitating easy on-chain meme coin creation, as the key factor diverting capital away from major altcoins.

Historical Context of Altcoin Season

Traditionally, when Bitcoin rallies, speculative capital flows into mid-to-high market cap altcoins, fueling what traders call “alt season.” The CMC Altcoin Season Index measures this phenomenon, considering the crypto market to be in the alt season when 75% of the top 100 coins outperform Bitcoin in the last 90 days. Currently, the index stands at 37.

Shift in Speculative Capital

According to Deutscher, this cycle has played out differently, with traders opting to chase fast-moving low-cap on-chain tokens instead of investing in top altcoins. This shift has resulted in the absence of a major “alt season” across major altcoins. Deutscher notes, “The reason we’ve seen no major ‘alt season’ across majors is because the speculative capital that would’ve once poured into top 200 assets instead decided to jump the gun and flood into on-chain low caps.”

Risks of On-Chain Meme Coins

Platforms like Pump Fun create a casino-like setup in crypto, allowing users to launch and trade meme coins instantly. This leads to massive gains for early adopters and insiders, while latecomers (mostly retail investors) suffer heavy losses as these illiquid tokens often lose most of their value shortly after being launched.

Deutscher argues that this phenomenon has resulted in significant wealth destruction, surpassing the losses seen in early 2022. He attributes this to the fact that retail investors are now getting stuck in illiquid on-chain meme coins, rather than major altcoins trading on centralized exchanges with decent liquidity.

Regulatory Factors and Future Prospects

Deutscher does not blame Pump Fun for this situation, instead pointing to restrictive SEC regulations that have made it difficult for projects to launch fairly through traditional means. He speculates that this might change in the future, potentially under new leadership.

Stay up-to-date with the latest cryptocurrency news and trends on Global Crypto News.

Post Views: 0