Record-Breaking Token Creation In January Raises Concerns Over Altcoin Liquidity, Market Quality

The cryptocurrency landscape is experiencing an unprecedented surge in token creation, with January 2024 marking a new high of over 600,000 new tokens launched in a single month.

This record-breaking figure, highlighted by CoinGecko co-founder and COO Bobby Ong, is raising concerns about market saturation and the future of altcoin investment.

“At this rate, we’re heading towards 1 BILLION tokens in the next 5 years,” Ong warned in a social media post.

He noted that compared to the average of 50,000 tokens created per month in 2022, the sheer volume of new tokens is fundamentally changing the dynamics of the crypto market.

The surge in token creation can be attributed to factors such as the emergence of new token incubators like Pump.fun, which simplifies the token launch process.

According to Ong, the “friction of launching a token has never been lower,” fueling a trend where “if it can be tokenized, it will be tokenized.”

The rise of meme coins further accelerates this phenomenon, as they represent “tokenized attention” and offer instant opportunities for tokenization.

This explosion of new tokens, particularly meme coins, is diverting liquidity away from established altcoins, effectively stifling the traditional alt season.

In previous cycles, investors would rotate profits from Bitcoin BTC/USD into larger, established altcoins, creating a wave of upward momentum across the altcoin market.

However, with hundreds of thousands of new tokens vying for attention and investment, liquidity is now fragmented and dispersed, making it harder for established projects to gain traction.

Also Read: Solana Meme Coin Ecosystem Under Fire: Galaxy Research Cites LIBRA Rug Pull As Major Blow

The proliferation of new tokens isn’t the only factor.

The growth of new blockchains and decentralized exchanges (DEXs) is also contributing to market fragmentation.

Ong notes that “5-10 new chains launch every month,” along with a multiplication of DEXs, further diluting liquidity and investment across an ever-expanding array of platforms and assets.

Speaking with Benzinga, Azeem Khan, co-founder of Morph, echoes these concerns, emphasizing the risk of prioritizing quantity over quality.

“The exponential growth in token creation presents a major issue that few are addressing: the loudest voices in the room are the ones getting heard.

Historically, though, the loudest voices tend to be the least informed.

This misalignment of incentives has created an environment where scammers thrive,” Khan warned.

He emphasized the need for stricter vetting processes to maintain trust and protect the industry from bad actors, citing incidents such as the $LIBRA coin as examples of the potential for fraud.

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