The influx of venture capitalists (VCs) into the cryptocurrency market may seem like a blessing, bringing new liquidity and funding to fledgling projects. However, according to analyst Route 2 FI, these profit-driven investors pose a significant threat to the long-term sustainability and price action of newly-launched tokens.

In a recent Substack post, Route 2 FI highlighted the detrimental effects of VCs on the crypto market, stating that their involvement leads to significant sell pressure, damaging the token's long-term price action. The analyst noted that the current trend of token launches, with high fully diluted valuations (FDV) and large unlocking schedules for early VC investors, is a recipe for disaster.

This mechanism, designed to attract early adopters with promises of big airdrop allocations, ultimately leads to a price decrease for most new tokens. Route 2 FI believes that most VC-backed tokens, with high FDV, will eventually "dump hard AF." However, the analyst also sees an opportunity for savvy traders to use this to their advantage in pair trading or hedging situations.

The total market capitalization of altcoins, excluding Bitcoin, has seen a significant increase of 38% year-to-date, reaching $1.05 trillion. However, this growth may be short-lived, as the sell pressure from VCs and the dilution of existing tokens through new launches may eventually take its toll on the market.

In conclusion, while VCs may bring short-term gains to token launches, their profit-driven approach harms the long-term sustainability and price action of these tokens. As the crypto market continues to evolve, it is essential to recognize the potential risks associated with VC involvement and to approach investments with caution.