The crypto analyst known for accurately predicting the end of Bitcoin's BTC/USD bull market in 2021 has shared insights into the recent downturn in the altcoin market.
On Friday, pseudonymous crypto strategist Pentoshi shared his view on X, formerly known as Twitter, that the recent altcoin crash can be attributed to simple supply and demand dynamics combined with a loss of momentum.
Pentoshi explained that the frequent launch of new altcoins diluted demand. This saturation led to a scenario where around $200 million a day in new money inflows was necessary to sustain current prices.
Eventually, supply outpaced demand, leading to sharp declines in the market, he said.
"We got to the point where there were a lot of new coins launching daily and each one needed more and more liquidity to support it. At one point, it needed around $200 million a day of new money inflows to support current prices," Pentoshi said in a post highlighting the imbalance that precipitated the crash.
Despite this significant correction, Pentoshi remained optimistic about the broader crypto bull market's health.
He emphasized that the downturn represents a local, not a macro, top and suggested that the market is far from reaching a point of "infinite supply" with no buyers left, which typically signals the end of a bull market.
"We reached a point of balance and then the other team took over temporarily,” Pentoshi added.
Pentoshi's analysis of TOTAL3, an index that tracks the value of the altcoin market, showed a roughly 30% drop from its 2024 peak of $788.85 billion to a low of $563.85 billion.
However, he anticipated support at around $600 billion and predicted a rebound to a $1 trillion market valuation.
"This isn’t the macro top, in my opinion, just a local one," Pentoshi added.
However, he cautioned that a change in this outlook would depend on significant shifts, such as Bitcoin losing market structure or substantial outflows from Bitcoin ETFs.
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