Altcoin dilution: Is the market stretched too thin? 🪙

There’s been a lot of talk this cycle about altcoin dilution, with literally thousands of tokens now available, many are concerned that capital is being spread too thin.

Some influencers are even saying we might not see an altseason at all this time around.

So is the altcoin party going to end anytime soon?

Let’s unpack it.

What is altcoin dilution?
Altcoin dilution happens when too many tokens flood the market, reducing the capital and attention each project receives. In past cycles, there were fewer altcoins, which meant more concentrated gains when capital flowed in and the parabolic growth part of the cycle took off.

But these days? We’ve seen such an explosion of new projects, surely something’s gotta give, right?

Well, yes, the pie is being sliced thinner. And yes, dilution is real. But here’s what everyone seems to forget: This cycle is different in a whole new way.

We’re not playing the same game we were in 2017 or even 2021.

The institutional effect
For the first time in crypto history, the institutions have arrived. And they’re not just buying Bitcoin, they’re also buying high-quality alts. The emphasis is on ‘high-quality’.

As coach Gary says, Bitcoin is the rising tide that lifts all boats – provided there’s no holes in them!

Let’s look at some of the recent institutional moves:

• Grayscale has introduced the Grayscale Bittensor Trust, providing investors exposure to the TAO token.
• BlackRock has significantly increased its Ethereum holdings purchasing over $50 million worth of Ethereum in June alone and bringing its total ETH holdings to approximately 1.4 million ETH.
• IBM and Google continue to support Hedera (HBAR) through their participation in Hedera’s Governing Council.
• World Liberty Financial (WLF) has made substantial investments in various altcoins. Including Move, Link, Ondo and Avalanche (AVAX).

So as we can see, they aren’t buying the latest fluffy meme coins that just launched. They’re allocating into projects with strong fundamentals, real-world use cases, and long-term potential.

Why is the market so diluted?
The barrier to launching a token is now lower than ever, and anyone can create a token quickly. This is why we always say to research any investments, and not FOMO buy based on hype. A lot of the dilution is coming from meme coins and short-lived pump-and-dump tokens. They generate noise, flood the market with supply, and attract attention, but they’re not designed to go the distance.

They’re here for a quick moment, not a long run.

Most don’t have real teams, solid roadmaps, or any long-term vision. And the reality is that many of these tokens won’t stick around long enough to matter. They’re not competing with the long-term players, they’re simply passing distractions.

So where does that leave us?
I believe this cycle could be the last that sees a lot of peripheral, highly speculative assets do as well as they have in the past. After this, our strategy may shift more towards altcoins preferred by institutions.

But for this cycle?

If you’re exposed to alts with strong utility, great teams and a real use case, capital is still going to find its way to quality.

Just think of how many surf brands followed in the footsteps of Billabong and Ripcurl. They inspired a wave of similar labels, but that doesn’t mean they attract the same capital or brand loyalty. They’re not household names, and they don’t always ride the same wave.

That’s why at DWG, we carefully curate model portfolios based on high-performing, strong-utility projects that have the right metrics to be successful in this market. Quality will always rise above the hype.