Chain plunge shaking the altcoin market… Concerns of a ‘lemon market’ are growing

Distrust is growing in the altcoin market, excluding Bitcoin (BTC). With consecutive cases of sharp declines in a short period, investment sentiment is shrinking across the market, and concerns about a 'lemon market' are spreading.

According to Coinmarketcap, a virtual asset market tracking company, the prices of some altcoins such as Story (IP) and AI Prophecy (ACT) plummeted by more than 20% in just one hour on the morning of the 15th before rebounding. This occurred shortly after the major real-world asset (RWA) project Mantra (OM) collapsed by over 90% the day before. OM was in the top 20 global altcoins with a market capitalization of about $5.9 billion, but due to the crash, its market cap shrank to one-tenth of its size within a few hours.



A similar trend continued earlier this month. On the 1st (local time), altcoins such as ACT, DF, and TUT plummeted up to 50% within 30 minutes, centered around the world's largest virtual asset exchange Binance. As altcoin crashes are occurring chain-reactively and not limited to specific projects, investor anxiety is growing.

Market trust contraction is also confirmed by indicators. The Coinmarketcap 'Altcoin Season Index', which represents altcoin investment sentiment, dropped to 15 points. The index, which indicates altcoin weakness as it approaches zero, is rapidly declining, reflecting market cooling.

Experts pointed to the concentration of funds around BTC as the background for this phenomenon. Kim Gyu-jin, CEO of Tiger Research, said, "As BTC is attracting attention as a strategic asset, institutional funds are flowing into BTC" and "Consequently, altcoins with weak institutional demand are experiencing a sharp decline in liquidity, causing supply and demand imbalance." Kim Dong-hyuk, a researcher at Dispread, also explained, "While there are many listed altcoins, most have low trading volumes and poor liquidity" and "Thin order book coins can sharply decline with minimal selling pressure, leading to a chain liquidation structure."

Some voices warned about the structural weakness of the altcoin market. Arthur Cheong, founder of Defiance Capital, pointed out through his social media X account, "The altcoin market is losing trust as centralized exchanges (CEX) are overlooking market distortions" and "Most tokens released this year have become a 'laughingstock' by plummeting 70-90% within months of listing."

However, some view this situation as a 'time of purification'. Kim Min-seung, head of Korbit Research Center, explained, "There are competent projects in the altcoin market" but "In a market with insufficient liquidity, even quality assets can be undervalued or distorted." He predicted, "Projects with practicality and regulatory acceptance in decentralized finance (DeFi), real-world assets (RWA), and blockchain infrastructure are gradually emerging" and "In the medium to long term, the market is likely to be reorganized around projects with technological foundations and institutional compatibility."

Kim Jung-woo, Reporter

woo@sedaily.com