Why Altcoins in Bear Market Are Not Automatically Cheap

A drop of 80% does not automatically mean that an altcoin has become cheap. This is the warning from crypto analyst Daan, who argues that much more damage can occur if the market collapses further. In a bear market, different forces come into play than just the current price.

FDV tells the real story

Many altcoins give the impression that their market capitalisation has only fallen by 50%, while the price has crashed much harder. This discrepancy arises because investors look at the circulating supply, not at the fully diluted valuation (FDV). The FDV reveals the true price tag you pay once all tokens are in circulation.

Large VC coins perfectly illustrate this problem. Although they have dropped more than 95% from their peak, the numbers hide a much bleaker picture. The circulating supply is so small compared with the total supply that the actual dilution is far greater than the market cap suggests.

Token unlocks and inflation as the biggest enemies

What many investors do not anticipate are the token unlocks and ongoing inflation. When bullish momentum disappears and buyers dry up, these factors become crucial. They determine the difference between altcoins that drop 80% and those that ultimately lose 99%.

The warning is clear: in a bear market, you cannot simply assume an altcoin is cheap just because it has fallen sharply. The market only decides when valuation truly comes into play. Until then, the risk of further declines remains significant, especially as money flows and momentum weaken.