Understanding the 2024 Token Landscape: Institutional Impact 🤔
This year has presented new challenges for tokens, as many have not been able to replicate the successes of earlier launches. However, the influence of institutional investment has emerged as a noteworthy determiner for the triumph of certain tokens, highlighting its importance in today’s market scenario.
The Present State of the Crypto Market 📈
As of September 16, 2024, the total market value of all fungible tokens exceeded $2 trillion. Among them, altcoins, which include any cryptocurrency other than Bitcoin (BTC) and Ethereum (ETH), have collectively increased in market value by approximately $240 billion over the last year. This general growth, however, has not been mirrored by many new tokens from 2024, which have struggled to gain substantial traction.
The primary factor behind the lackluster performance of these tokens is the overwhelming number of new entries. The total count of altcoins surged by 107% in the past year, rising from 1.69 million in August 2023 to above 3.5 million in 2024. In sharp contrast, the global crypto user population grew by only 33%, from 420 million to 562 million. The disparity in growth has led to diluted market attention and resulted in poor liquidity and pricing for many individual altcoins.
How Institutional Investment is Shaping the Market 📊
Tokens that have flourished this year typically attract considerable institutional interest from liquid funds. Unlike venture capital, which usually invests at an early stage, these institutional investors operate in open markets, significantly influencing an altcoin’s trajectory. Examples of tokens that have benefited from such institutional backing include TON (TON), SOL (SOL), XRP (XRP), BNB (BNB), ADA (ADA), TRX (TRX), AVAX (AVAX), SUI (SUI), and MOCA.
This reinforcement from institutions aids altcoins in distinguishing themselves in an overcrowded market, thereby enhancing the confidence of retail investors. Unlike retail investors who may prioritize quick profits, institutional players are often concerned with the long-term outlook, which can contribute to better attention, stability, and liquidity for these assets.
Pushing Towards Greater Institutional Engagement 🏦
There remains ample opportunity for institutional investment growth within the cryptocurrency sector. In the US equity market, institutional investors control around 80% of the total market cap for large-cap S&P 500 companies. However, their involvement in the Web3 space is still modest, with a significant concentration on Bitcoin.
By June 2024, it was noted that 77% of institutional asset managers had allocated a mere 5% or less of their total funds to cryptocurrencies and related assets. This observation underscores the need and potential for the Web3 environment to develop a more balanced and diverse market. Theoretically, institutional holdings could stabilize around 50%, allowing for a healthier market structure.
Increased engagement from institutional players could inject a large volume of long-term capital into the cryptocurrency ecosystem, fostering heightened trust in various Web3 initiatives. Projects that successfully appeal to these investors may have a distinct advantage in a competitive landscape, helping to combat the issue of diminished market attention.
Yat Siu, co-founder of Animoca Brands, has addressed the crucial role of institutional support for Web3 initiatives. Animoca Brands is actively involved in fostering this type of support through various measures, such as participating in the Hong Kong Monetary Authority’s stablecoin issuer framework and investing in projects like TON and Mocaverse.
In the current market climate, altcoins that showcase strong institutional attraction and capabilities are positioned to achieve substantially greater success compared to their peers.
Hot Take on the Future of Tokens 🔮
This year marks a turning point for the cryptocurrency landscape, emphasizing the pivotal role of institutional investments. As the market adapts to this new dynamic, the tokens that can effectively align with institutional interests are likely to emerge victorious. The changes in market behavior and focus may ultimately shape a new era for cryptos, paving the way for a more robust and balanced ecosystem.
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