In a detailed analysis shared with his 788,000 followers on for him ideas Providing a deep dive into fundamental factors that can moderate market performance.
Why should cryptocurrency investors expect diminishing returns?
Pintucci began his analysis by saying, “This cycle should have the greatest diminishing returns of any cycle,” and attributed this prediction to several key market conditions. Primarily, he noted that the underlying market capitalization of cryptocurrencies has increased significantly in each successive cycle, setting a higher starting point that makes further exponential growth increasingly difficult.
“Each Earth cycle has set it at about 10 times the previous low in terms of market capitalization,” Pintucci explained. He provided historical context, recounting that when he entered the cryptocurrency market in 2017, the market cap of altcoins was only about $12-15 billion, a number that rose to over $1 trillion during peak periods. “This growth is not replicable,” he said, noting that the then-nascent decentralized finance (DeFi) sector played an important role in driving the exceptional returns of previous cycles.
Another important factor highlighted by Bentucci is the significant increase in the number of altcoins and the corresponding dilution in the market. However, “today, there are a lot more alternatives, a lot more dilution,” he said, noting that the proliferation of new tokens results in investment being spread less throughout the market, reducing the potential for individual tokens to achieve significant price increases.
Pintucci also touched on demographic shifts in cryptocurrency ownership. He compared the early days of cryptocurrency adoption, when roughly 2% of Americans were participating in the market, to the present, when more than 25% of Americans have some form of investment in cryptocurrencies. “It just takes more capital to move markets, and there will still be too many alternatives, spreading them out further,” he noted, stressing the logistical and financial challenges of replicating previous growth rates in a more saturated market.
One often overlooked aspect of market dynamics, according to Bentucci, is the role of token liquidity and its impact on price stability. Recently, around $250 million worth of tokens have been opened daily, although not necessarily sold, he explained. “Assuming they are all sold, these are just the inflows you would need to keep prices stable for 24 hours,” he explained, highlighting the delicate balance required to maintain current market levels, let alone push prices higher.
Looking ahead, Pintucci was conservative in his predictions for the Total3 Index, which tracks the top 125 altcoins (excluding Bitcoin and Ethereum). “My best guess is that this cycle we don't see Total3 exceeding 2x the 21 ATH cycle. So 2.2T max for Total3,” he estimated. This prediction confirms his broader thesis that while the market continues to offer daily opportunities, the era of “huge easy gains” may be behind us.
Bentucci concluded his analysis with advice for investors, suggesting a more cautious approach towards participating in the market. “If you think the cycle is 50% over, you should withdraw more than you invest and raise some cash and buy other assets with lower risks in the meantime,” he advised, stressing the importance of locking in gains and diversifying the economy. Holdings to mitigate risk.
Reflecting on the psychological aspects of investing, he added: “Most people never learn. Because if you cannot control your greed, and defeat it, you are destined to give up your gains again and again.” His parting words were a reminder of the cyclical and often predatory nature of financial markets, and he urged investors To secure profits and protect themselves from the expected downturn.
At press time, TOTAL3 stands at $635.565 billion, which is still more than -43% below the last cycle high.
Featured image from iStock, chart from TradingView.com
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