Altcoin Trading Faces Challenges Amidst Explosive Growth and Modest Capital Inflows

Altcoin trading is a lot like playing online poker. I’ve played over 2 million hands, starting back in college and continuing for five years. I’ve seen the poker industry change firsthand. The first big poker boom hit in the mid-2000s, bringing millions of players online and creating some very profitable games.

Then came "Black Friday" in April 2011. The U.S. government shut down major poker sites and froze player accounts overnight. With new American players gone, the competition became fierce. The remaining global players stepped up their game.

Players started using tracking software to analyze their opponents and improve their own strategies. Over time, advanced tools called "poker solvers" became common. These tools helped players learn optimal strategies based on game theory. As the game got more analytical, poker sites reduced “rakeback,” which is money players get back from fees. This shift, along with the introduction of bots, made it even tougher for regular players to win.

Now, looking at the altcoin trading scene, I feel a similar shift. It’s getting harder.

There are many ways to make money in altcoin trading. You can be a scalper, a swing trader, a yield farmer, or even an airdrop hunter. But these strategies are becoming more challenging for two main reasons.

First, capital inflows are modest. The stablecoin market cap is a good measure of money entering crypto. Right now, it’s about $178 billion, still below its all-time high of $188 billion. After a significant downtrend, stablecoin supply has just started to recover. It did hit a new all-time high if you exclude non-algorithmic stablecoins.

In 2022, the algorithmic stablecoin Terra Luna’s UST was worth $18.7 billion and fueled a bullish market that made altcoin gains easier. Nowadays, fiat-backed stablecoins are increasingly used for real-world applications. For example, Stripe recently acquired Bridge for $1.1 billion. While this is a positive development, it also means that stablecoin growth has a weaker effect on creating a risk-on environment for altcoins.

Recent capital inflows into the altcoin market from both institutional and retail investors are encouraging, even if they’re modest. But during the two years it took for this capital to flow in and for stablecoin market cap to recover, the altcoin market has changed significantly.

The second factor is the explosion of new altcoins. We’re seeing hundreds of thousands, sometimes millions, of new tokens launched each month. While stablecoin supply took two years to recover, the altcoin supply has skyrocketed. Most crypto innovations come from the Ethereum ecosystem, which has produced over 100,000 new tokens each month. Just this summer, more than a million new tokens were launched.

Pump.fun, a platform for launching memecoins, has helped users create over 3 million new memecoins since the beginning of the year.

This rapid growth in altcoins, combined with modest capital inflows for speculation, leads to a situation where limited capital is chasing a rapidly increasing number of assets. Many altcoins still show negative returns this year, despite Bitcoin being in a bullish trend since late 2022. This has made trading altcoins much more difficult.

Bitcoin dominance, which shows BTC’s share of the total crypto market, rose from 40% in late 2022 to around 60% just before the recent U.S. elections. Historically, when Bitcoin dominance rises sharply from major lows, it often gives way to altcoins as excitement builds and new capital flows into alternative digital assets. After Trump’s win was confirmed, Bitcoin dominance fell to 58% from its peak of 60%, even as Bitcoin surged past $80,000. The altcoin market, especially Ethereum, responded positively to the Republican sweep, anticipating a new era of favorable regulation.

If someone asked me whether to pursue a career as a professional online poker player today, I’d say it’s not worth it. The juice just isn’t there anymore. While I wouldn’t necessarily recommend becoming a professional crypto trader, there are still plenty of profitable opportunities in the crypto markets, even though it’s getting tougher.

Altcoin trading is indeed becoming harder, but we’re entering a new optimistic phase for crypto. We haven’t seen the much-anticipated "alt season" yet, but there have been frequent chances for profitable momentum trades throughout this cycle, from GambleFi to AI memecoins. Sure, there’s uncertainty about whether Republicans will follow through on their promises to support crypto, but the narrative alone can fuel optimism in the months leading up to Trump’s inauguration.

As we head into Q4, it’s important to adapt to this new reality. Accept that there will be fewer opportunities for 100x returns. Be agile and proactive in responding to hot market trends. And be more aggressive about taking profits and cutting losses. Yes, it’s getting harder, but opportunities remain. It’s definitely more appealing than playing another 100,000 hands of poker!