Analysts are warning that liquidity issues might continue in the crypto market. It could be as seen during pre-pandemic times when the market had limited liquidity.
Market expert AB Kuai Dong noted that broader industry liquidity reached tight market conditions before COVID-19 emerged. He stated that the present liquidity pressure is even higher because numerous new high-value projects want to do token launches.
The present market situation demonstrates heightened obstacles in maintaining capital influx while attracting new investors to stop market fluctuations after how earlier cycles performed.
Weak market liquidity exists for all cryptocurrencies after Bitcoin, except Bitcoin. This creates difficulties for new tokens in preserving their listing prices. Many high-level projects preparing to issue tokens face additional challenges because previous valuation processes compel them to start their tokens at higher prices.
High-Valued Projects Struggle With Post-Listing Price Pressure
The valuation of upcoming projects has risen due to initial funding rounds that allocated premium pricing, according to AB Kuai Dong. The projects must list higher than their original cost value to keep important investors from selling en masse.
The new strategy has introduced fresh risks because project values tend to plummet after completing their listing process.
– Advertisement –
Current market data demonstrates a rapid downturn in project values after their initial stock exchange listing at multiple billion-dollar levels. Kuai Dong advised that newly listed projects must anticipate their prices will decrease by more than 80% after going public.
The market capitalization of $2 billion projects drops to $300 million in value, while $700 million projects lose value below $100 million. According to his expectations, the pattern will continue to persist across the summer period.
VC Funding Challenges May Intensify by 2025-2026
The challenging market conditions currently affect but do not change the essential role of venture capital investments in the crypto industry. The business environment now appears different from when the pandemic had not yet struck.
Most venture funds used to obtain their capital only through personal wealth and mining operation proceeds before COVID-19. Venture capital investment managers received low pay of 10,000 RMB per month.
Crypto valuation increased because of heavy investor interest and pandemic-era money influx. This enabled venture capital firms to obtain sizeable outside financial support.
The salary amounts for Singapore fund managers rose sharply because they received $5,000 and above in Singapore dollars. This also included additional benefits for travel expenses and accommodations.
Several analysts predict this funding pattern will not continue indefinitely. Kuai Dong predicts that venture funding will face difficulties securing new capital allocations starting in 2025 or 2026 when several five-year investment periods expire.
Several investment funds may need to be disbanded because returns have decreased and investor trust has declined. This could result in massive job losses and reduced pay for investment professionals.
Kuai Dong predicts the decline in pending venture funding would establish a fundamental transformation that would lead to an improved crypto investment system. Bitcoin maintains elevated pricing positions while the alternative cryptocurrencies continue experiencing a drawn-out bearish phase.
Source: https://www.thecoinrepublic.com/2025/02/12/crypto-market-facing-liquidity-struggles-amid-vc-coin-sell-off/