As of September 16, the total market capitalization of all fungible tokens has surpassed $2 trillion. Within this figure, altcoins—cryptocurrencies that are not Bitcoin (BTC) or Ethereum (ETH)—have collectively appreciated by approximately $240 billion over the past year.
Despite this remarkable growth, the performance of most new tokens introduced in 2024 has been lackluster, with many struggling to gain traction. What accounts for this disparity in value compared to their earlier counterparts? The answer lies in one word: attention. Although the market cap for altcoins has risen, it is largely due to a vast influx of new tokens launched in 2024. Unfortunately, this oversupply has fragmented attention across individual altcoins, leading to diluted liquidity and subpar price performance following their listings.
The rise in market capitalization for Bitcoin and Ethereum between September 2023 and September 2024. Source: Animoca Labs
In the past year, the market cap for altcoins has surged by over 70%, mirroring trends seen in the leading cryptocurrencies. The stark difference is that Bitcoin and Ethereum are singular entities, while the altcoin landscape is populated by millions of distinct tokens, each contributing to the overall market value. Throughout the year, the dominance of Bitcoin and Ethereum—measured by their market share against altcoins—has remained relatively stable.
Bitcoin market dominance from November 2023 to September 2024. Source: CoinMarketCap
However, on an individual basis, most altcoins released in 2024 have underperformed. Discussions surrounding this issue have often pointed to the detrimental effects of excessively high fully-diluted valuations (FDVs) and limited circulating supply, or the disparity between venture capital and retail investors. Nevertheless, an analysis by Haseeb Qureshi, Managing Partner at Dragonfly, indicates that there is insufficient evidence to attribute the underperformance of altcoins in 2024 solely to these factors.
In a saturated market, attention has become the new currency.
The number of altcoins has skyrocketed by 107% in just one year, climbing from 1.69 million tokens in August 2023 to over 3.5 million today. In stark contrast, the growth of the crypto user base has been considerably slower, with global crypto ownership only increasing by 33% during the same timeframe—from 420 million to 562 million.
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We are facing a situation where the supply of altcoins has more than doubled, yet the potential audience has only expanded by one-third. This has significantly diluted consumer attention.
This oversaturation of altcoins and the subsequent dilution of attention are not uncommon in burgeoning markets. For instance, during the early Internet era, a multitude of IRC chat rooms, forums, and websites emerged, all vying for attention and diluting the focus of a growing audience.
The current landscape of altcoins means that gaining awareness has become a fiercely competitive endeavor for all tokens, not just the newcomers; even those launched before 2024 have experienced a decline in attention and, consequently, value.
Altcoins backed by institutional investors tend to outperform their peers.
The altcoins that have thrived in 2024 generally feature significant interest from institutional investors. Unlike venture capital firms that invest at the startup stage, liquid institutional investors enter through the open market, significantly influencing the performance of altcoins. Tokens such as TON (TON), SOL (SOL), XRP (XRP), BNB (BNB), ADA (ADA), TRX (TRX), AVAX (AVAX), SUI (SUI), and MOCA have benefitted from such institutional backing.
This support can help altcoins counteract the attention dilution prevalent in a crowded market. Institutional investors are selective and strategic in their investment choices, focusing on long-term potential rather than short-term gains typical of many altcoins, particularly memecoins. Their participation not only elevates the profile of an altcoin but also fosters increased confidence among retail investors. In contrast to the current climate of fragmented liquidity and diminished attention, institutional investment can provide enhanced focus and liquidity to altcoins.
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Institutional investors also have the ability to deploy significantly larger capital over longer timeframes compared to retail investors, contributing to greater price stability in the market. Altcoins lacking institutional support are often subject to heightened volatility.
At Animoca Brands, we actively support projects and initiatives by engaging in collaborations such as participating in the Hong Kong Monetary Authority’s stablecoin issuer sandbox (alongside Standard Chartered and HKT), partnering with Saudi Arabia’s NEOM, and investing in TON. Our involvement with the MOCA Foundation’s launch of MOCA Coin has also attracted other institutional investors. Our mission is to equip these projects with essential resources. Additionally, we have broadened our investment strategy to include already listed tokens, especially those within our Web3 portfolio.
The current market landscape presents significant opportunities for altcoins that demonstrate robust institutional appeal and capabilities, positioning them for greater success amid evolving market dynamics.
There remains ample opportunity for institutional investment.
The potential for institutional investment in crypto is vast. In the U.S. equity market, institutional investors hold a commanding 80% of the market capitalization of large-cap companies in the S&P 500. In contrast, the Web3 market remains relatively underrepresented by institutional investors, with most institutional capital still concentrated in Bitcoin. As of June, 77% of institutional asset managers had allocated a mere 5% or less of their funds to cryptocurrencies and related assets, favoring registered investment vehicles.
EY-Parthenon research estimates the allocation percentages for funds in cryptocurrencies, digital assets, and related crypto products. Source: EY-Parthenon
With Bitcoin’s market cap around $1.1 trillion, it’s notable that Bitcoin ETFs account for less than $80 billion. This gap underscores both the necessity and opportunity for Web3 to cultivate a more balanced market, potentially achieving around 50% institutional holdings.
Increased institutional participation could foster greater trust in Web3 projects while introducing substantial new long-term capital. Web3 initiatives that successfully attract institutional interest are likely to stand out in this crowded market, providing a crucial strategy for overcoming attention dilution. We believe that financial institutions play a vital role in Web3, just as they do in other industries. Therefore, projects aiming for meaningful long-term success should actively pursue strategies that secure institutional involvement.
Yat Siu is a guest columnist for Cointelegraph and the co-founder and executive chairman of Animoca Brands, a leader in Web3 with over 540 investments in the sector.
This article is intended for general informational purposes and should not be regarded as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.