Quick Facts
There are currently over 5,000 cryptocurrencies listed on major exchanges, with the total number of tokens exceeding 36.4 million.
The Rise of Altcoins
In the early days of Bitcoin, the term “altcoin” referred to any cryptocurrency that was not Bitcoin. However, as the digital asset landscape expanded, the definition of an altcoin broadened to include any cryptocurrency that was not the leading cryptocurrency by market capitalization, typically Bitcoin. The altcoin season, marked by the rapid growth and increased interest in alternative cryptocurrencies, began in 2017 and continued into 2018. During this period, the total market capitalization of altcoins increased significantly, with many tokens experiencing exponential growth.
Oversupply and Consolidation
Fast forward to today, and the landscape has changed dramatically. With the introduction of new cryptocurrencies and the increasing adoption of blockchain technology, the number of tokens in existence has grown exponentially.
One of the primary concerns is the issue of oversupply. With so many tokens in the market, it becomes increasingly difficult for individual tokens to stand out and establish a significant following. In an oversupplied market, tokens with weaker fundamentals and lack of adoption may struggle to attract investors and maintain their market value.
Another consequence of oversupply is the increasing number of tokens with significantly low liquidity. Low liquidity, often referred to as “thin markets,” can make it difficult for investors to buy and sell tokens, leading to wider bid-ask spreads and increased volatility. This can drive away investors and make it challenging for tokens to attract new capital.
Market Saturation and Competition
The proliferation of tokens has also led to market saturation, making it difficult for new tokens to gain traction. With so many tokens competing for investor attention, it becomes increasingly challenging for new tokens to stand out and establish a significant presence in the market.
The competition for attention is not limited to new tokens only. Established tokens with strong fundamentals and a significant following are also facing increased competition from newer tokens that may be offering similar products or services.
The Impact on Altcoin Season
The oversupply of tokens and the increasing competition for attention could have a significant impact on the altcoin season. If the market becomes saturated, it may become increasingly difficult for tokens to grow and maintain their market value.
In addition, the increasing competition for attention may lead to a shift in investor focus towards more established and tradable tokens, potentially favoring the top-tier tokens over newer entrants.
Unique Contribution: A Hierarchy of Tokens
In an attempt to address the oversupply of tokens and market saturation, I propose the concept of a “hierarchy of tokens.” A hierarchy of tokens would involve categorizing tokens based on their market capitalization, adoption rate, and fundamental characteristics.
This hierarchy could help investors navigate the vast universe of tokens and identify the most promising tokens for investment. It could also provide a framework for token development and the allocation of resources.
At the top tier of the hierarchy would be tokens with significant market capitalization, high adoption rates, and strong fundamentals. These tokens would have a lower risk profile and higher potential for growth.
The mid-tier tokens would have moderate market capitalization, moderate adoption rates, and moderate fundamentals. These tokens would have a higher risk profile and higher potential for growth than the top-tier tokens.
The bottom-tier tokens would have low market capitalization, low adoption rates, and weak fundamentals. These tokens would have a higher risk profile and lower potential for growth.
