The cryptocurrency market has seen a significant correction after a massive surge from October to March, with Bitcoin and Ethereum hovering near their yearly highs. However, altcoin investors are facing a brutal correction, with many smaller cryptocurrencies experiencing a decline of 40% to 70% from their March peaks. The selling pressure from venture funds, lack of fresh inflows to crypto and seasonal trends have contributed to this weakness in altcoins.

One of the primary reasons for the struggle of altcoin investors is the constantly diluting supply of tokens via unlocks and distributions scheduled for years ahead. Many tokens are locked up, bought by early investors or earmarked for ecosystem developments and grants, leading to a constant stream of sell pressure. This is unlike equities, which have a constant passive bid from ETF inflows and bond buybacks.

Venture capital funds have also played a significant role in the selling pressure. They invested $13 billion in Q1 2022, but the market turned into a steep bear market. As a result, these funds are under pressure from their investors to return capital, leading to a significant portion of the selling pressure. The lack of fresh inflows to crypto markets has also stalled or even reversed, shown by the market value of stablecoins, which are mostly used as an intermediary for crypto trading.

Seasonal trends have also been bearish for smaller tokens, with June usually being a down month for altcoins. TradingView data shows that the aggregated market cap for crypto assets excluding BTC and ETH saw a decline in every June during the past six years. This month is on track to be no exception, with TOTAL.3 down 11% to date.

The cryptocurrency market is undergoing a healthy consolidation after a massive run-up from October to March, but altcoin investors are facing a brutal correction. The selling pressure from venture funds, lack of fresh inflows to crypto and seasonal trends have contributed to this weakness in altcoins. The constantly diluting supply of tokens via unlocks and distributions scheduled for years ahead has also added to the pressure. As the market's appetite for smaller, more speculative crypto assets dwindles and trading volumes fall, there's not enough demand to absorb this supply shock.

Many altcoins experience a constantly diluting supply of tokens via unlocks and distributions scheduled for years ahead. This is because most of the tokens are locked up, bought by early investors or earmarked for ecosystem developments and grants. For example, Ethereum layer-2 network Arbitrum's token is nearing its all-time low price from last September, even though its market capitalization has risen to $2.5 billion from $1 billion due to a massive increase in its supply.

Another example is solana, whose supply is inflating by 75,000 tokens, worth some $10 million at current prices, every day. This constant stream of sell pressure has led to a significant decline in the price of many altcoins. The lack of fresh inflows to crypto markets has also stalled or even reversed, shown by the market value of stablecoins, which are mostly used as an intermediary for crypto trading. The combined market capitalization of the four largest stablecoins has been flat since April after a $30 billion expansion earlier this year.

Stablecoin balances on exchanges, which translate to dry powder for traders and investors, decreased $4 billion to the lowest level since February. This has particularly bad implications for tokens with large upcoming unlocks as well as new tokens and airdrop programs. Recently launched tokens of blockchain bridge Wormhole, yield-bearing synthetic dollar protocol Ethena and layer-2 network Starknet all plummeted roughly 60% to 70% in price from their respective highs and will face billions of dollars worth of tokens being distributed in the coming years.

In conclusion, altcoin investors are facing a brutal correction due to the selling pressure from venture funds, lack of fresh inflows to crypto and seasonal trends. The constantly diluting supply of tokens via unlocks and distributions scheduled for years ahead has also added to the pressure. As the market's appetite for smaller, more speculative crypto assets dwindles and trading volumes fall, there's not enough demand to absorb this supply shock. The cryptocurrency market is undergoing a healthy consolidation after a massive run-up from October to March, but altcoin investors need to be cautious and adapt to the changing market conditions.