Altcoins just suffered the worst sold out in years, with over $460 billion being wiped out in days. Will fluidity spin back or will another alto season dream fade forever?
Altcoin under pressure
On February 3, global financial markets suffered a sharp flash crash after Donald Trump imposed tariffs on China, Canada and Mexico, causing divestment across global markets. Stocks, commodities and cryptocurrencies responded quickly, with altcoins earning their biggest hits.
At the end of January, Altcoin's total market capitalization was $1.46 trillion, but by February 3 it had plummeted to $1 trillion, dropping 31.5%, and its market value wiped out $460 billion.
Since then, the market has shown signs of a recovery, rising to $1.22 trillion as of this writing on February 5th. However, it is 16% below the January level, a 28% shortfall from its all-time high of $1.71 trillion. November 2021.
The overall sentiment in the Altcoin market remains weak. One key metric to measure whether Altcoin is outperforming Bitcoin is the CMC Altcoin Season Index, which tracks the performance of the top 100 Altcoins compared to Bitcoin over the past 90 days.
As of February 5th, the index was located at 36, dropping sharply from 87 in December 2024.
Readings above 50 suggest a mild altcoin rally, but above 75 indicate a full-fledged Altcoin season. At the current level, the index shows that Bitcoin continues to be the dominant force in the market, with Altcoins struggling to gain traction.
The price performance of major altcoins also reflects this sentiment. Ethereum (ETH) is currently down more than 18% and is currently trading at around $2,800. Solana (Sol) saw modest growth and rose 5% from the start of the year to $205.
Meanwhile, Ripple (XRP) is one of the most performant large Altcoins, earning 21% of years to date, and has skyrocketed 360% over the past three months.
The problem remains as institutional interest in Bitcoin continues to grow. Will altcoins see strong rallies in 2025, or will Bitcoin control continue? Let's look it up.
Bitcoin's advantage
The increasing advantage of Bitcoin's market has created a bottleneck for altcoin, preventing capital from flowing like in previous cycles.
As of February 5th, Bitcoin accounts for 61.5% of its total crypto market capitalization, the highest level since early 2021. This means that in every dollar invested in crypto, over 61 cents are in Bitcoin, leaving around 39 cents behind. Other coins combined.
Just two months ago, in December 2024, when Altcoins found some footing, this number was 54%, highlighting how much Bitcoin has regained its hold in the market.
It helps us to look at historical trends to understand why this is happening. Bitcoin's advantage tends to rise during uncertain times. The collapse of FTX (FTT) in November 2022 is a typical example.
Bitcoin dominated just 40% when confidence in the broader crypto market weakened. However, in the next few months, investors have moved capital more and more to Bitcoin, pushing its recent market share by over 64%.
A similar pattern took place between 2018 and early 2021. During that period, Bitcoin's advantage rose from 35% to 63% before gradually dipping as Altcoins began to outperform.
However, this time there is an important difference. It's an institution. Since the approval of the Spot Bitcoin ETF in January 2024, Bitcoin has absorbed an unprecedented amount of liquidity.
At the time of this writing, Spot BTC ETF holds over $120 billion in assets under management, with large financial institutions such as BlackRock, Fidelity and Grayscale leading claims.
At the same time, discussions about potential strategic Bitcoin reserves in the US have gained traction. If the government begins to consider Bitcoin as a hedge, the previously fueled capital revolving cycle could take much longer to materialize.
Unlike previous cycles when capital finally spins into altcoins, institutions are now accumulating bitcoins, focusing liquidity and limiting capital flows to altcoins.
What should I change to Altcoin Rally?
Historically, Crypto Markets' capital has moved in stages. Bitcoin first absorbs liquidity and absorbs major market gatherings. Once BTC is stable, the fund spins into Altcoins and triggers the Altcoin season.
This pattern was evident in 2017, when Bitcoin's dominance peaked at 70%, paving the way for a surge in ETH and XRP in early 2018. A similar trend occurred in 2021, when Bitcoin reached $69,000 before AltCoins was defeated.
Bitcoin's advantage is currently strong, forming a higher and higher low. This indicates that liquidity is still concentrated in BTC. For Altcoins to gain momentum, Bitcoin needs a long period of stabilization, allowing capital to spin.
A decline in Bitcoin control, below the main support level, indicates investors are shifting their funds. Additionally, catalytics such as Ethereum upgrades, regulatory clarity, or broader adoption could accelerate this transition.
Another factor that slows capital rotation is the increased presence of institutional investors. Unlike retailers, institutions tend to make calculated long-term investments. This means that you are less likely to follow the short-term trends of Altcoins, as seen in past cycles.
However, if Bitcoin's advantage begins to decline, the rotation process may follow an established sequence. The large Altcoins move first, followed by midcap, then a small speculative project. For now, the market remains in a retention pattern.
How on-chain speculation is disrupting the Altcoin market
The way speculative capital moves in the crypto market will change, and that shift could be one of the biggest reasons why the traditional Altcoin season hasn't yet come to fruition.
Analyst Miles Deutscher highlights the role of Pump.fun.
He explains that in previous cycles speculative capital flowed into the top 200 altcoins in centralized exchanges. Instead, much of its liquidity is now flooded with low on-chain cap tokens, many of which lack proper liquidity.
This new trend has created uneven market dynamics. “Early birds and insiders are getting insanely rich from now on,” Germany points out, but he adds that most retail investors who lost money late, like the previous altcoin cycle. Masu.
However, unlike 2022, when retail losses were mostly limited to relatively liquid altcoins listed in centralized exchanges, this time capital was trapped in tokens of non-liquid memes, many of which were It has already gone back 70-80%.
According to Deutscher, this shift has further exacerbated wealth destruction events than those seen in early 2022, despite Bitcoin and some major Altcoins remaining in the macrobull trend 。
Deutscher says the shift is partly attributable to regulatory uncertainty, forcing traders to look for alternative ways to speculate due to restrictions on fair project launches.
“We don't blame the Pump for the fun, as its launch is directly in response to Brash Crypto regulations that have made fair launch projects impossible.”
He adds that since 2017, the industry has been struggling to find a fair model for new projects, and that airdrops are the closest alternative.
Bitcoin re-regulation and quiet accumulation of Ethereum
Altcoins suffers from liquidity, but analysts at Bitcoin therapist believe that Bitcoin's current price does not reflect its true value.
“There's something grossly wrong with Bitcoin pricing in the market. We're easily undervalued between $50,000 and $100,000,” he said, and violent relicate events. suggests that it may be imminent.
In this case, Bitcoin's advantage could remain upwards for much longer than expected. Historically, Bitcoin has gone through a rapid re-rick phase when institutional demand may be present.
But as Matthew Highland points out, the recent crash was also the biggest liquidation event in the history of the code. This means that a quick recovery should not be expected. “It took me more than two months for a full recovery in 2020 and 2022,” he notes.
Hyland warns investors, particularly as they expect immediate returns to Altcoins' previous highs. Even during the rapid rebounds of 2020, there were multiple dips along the way.
“We probably won't see these December highs for at least two months on most ALTs,” he says, adding that previous high volatile events like Covid Crash, Luna Collapse and FTX Fallout all added. Ta. It took me a few months to recover.
Meanwhile, Ethereum is quietly watching a massive accumulation from key players. Analyst Naivive reportedly bought $200 million ETH through his Project World Liberty Financial, while Fidelity and BlackRock accumulate $49.7 million and $300 million in ETH, respectively. It is reportedly done.
This pattern suggests that whales are strategically waving weakly and are accumulating at low prices, taking advantage of market uncertainty.
If the regime's ETH accumulation continues, Ethereum could serve as a key indicator of wider Altcoin demand. As Ethereum begins to acquire against Bitcoin, early capital turnovers often signal a signal to large Altcoins.
However, Altcoin's recovery remains in the waiting stage until Bitcoin's dominance shows signs of weakening.
Disclosure: This article does not represent an investment advice. The content and materials listed on this page are only for educational purposes.
