10x Research Highlights Token Unlock Concerns and Ethereum’s Weakness

The current bullish cycle in the cryptocurrency market may be shorter than previous ones and is unlikely to end with a major altcoin rally, according to analysts at 10x Research. 

Beware of Token Unlocks. Will Venture Capital Funds cut this Altcoin cycle short?

?1-12) The current cryptocurrency bull market cycle might be shorter than previous ones and unlikely to culminate in a broad altcoin rally. Are the crypto venture capital funds to blame?

?2-12)… pic.twitter.com/nICNYmtDyK

— 10x Research (@10x_Research) May 8, 2024

Experts suggested that crypto venture funds might be to blame, as they could concentrate a significant share of tokens in the future. 

“Despite high daily trading volumes exceeding $100 billion and the rapid development and updates of crypto projects, there are significant limitations to the industry’s growth potential,” the company emphasized. 

Analysts believe that large token unlocks, amounting to nearly $2 billion over the next ten weeks, could have a severely negative impact on altcoins.

According to TokenUnlocks, the largest upcoming unlock will occur on May 15 by the L2 crypto derivatives platform Aevo. Developers will release 828.93 million AEVO (~$1.17 billion at the time of writing).

Of the total supply of 1 billion tokens, 18.5% will be allocated to private investors. 

A smaller unlock of 6.62 million WLD (~$39.78 million) from Sam Altman’s Worldcoin project is scheduled for July 24. This will account for 0.05% of the total token volume or 2.4% of the current circulating supply.

On May 12, Aptos will unlock 11.31 million APT (~$101.67 million) — approximately 2.6% of the circulating supply. 

Ethereum’s Perpetual Second Place

According to 10x Research head Markus Thielen, Ethereum’s weak fundamentals and recent trends indicate that Bitcoin will maintain its dominance.

Since 2017, the leading cryptocurrency has significantly strengthened its position in investor portfolios, transforming from a “peer-to-peer currency into pure digital gold,” the expert believes. 

“During the 2020-2021 cycle, Ethereum was the driving force as the blockchain was expected to replace the outdated banking system. […] However, Ethereum developers did not respond quickly enough,” the note states. 

Thielen asserts that the Dencun hard fork, aimed at reducing high gas fees, appeared only three years after these issues became apparent:

“Cryptocurrency users (and traders) do not sit and wait for the blockchain to eliminate its bottlenecks. Instead, they move on, and today most of the action happens on the second layer.”

The expert noted that after the update, Ethereum’s dominance index fell from 17.8% to 15.8%, and the ETH/BTC trading pair has been in a downtrend since September 2022.

Thielen added that the total value locked in Ethereum protocols is far below its peak and is mainly limited to staking and restaking.

“The concept of locking Ethereum became flawed as soon as U.S. Treasury bonds appeared on the network with much higher yields (5%). At the same time, the number of use cases for ETH sharply declined. The more people realize this, the less demand there will be for the asset,” explained the head of 10x Research.

The regulatory framework also remains a significant barrier for Ethereum. The uncertainty of the U.S. Securities and Exchange Commission regarding the classification of the asset negatively affects it, Thielen noted. 

Back in April, 10x Research warned of the market approaching a “decisive turning point,” which could result in a significant correction. The company identified “unexpected and persistent” inflation as the main trigger. 

In May, Glassnode analysts explained the divergence between Bitcoin and Ethereum post-halving. The relatively negative dynamics of the second-largest cryptocurrency by market capitalization are linked to capital rotation.