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The altcoin market is currently trapped in a cycle of stagnation, with minimal new capital entering and trading volumes plummeting.
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Recent data indicates a trend of capital reallocation among altcoins rather than increased liquidity, reflecting cautious investor sentiment.
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“The altcoins are experiencing a funding freeze, leading to an extension of the anticipated altseason,” noted a prominent analyst on social media.
This article explores the current stagnation in the altcoin market, examining the implications of liquidity issues and Bitcoin dominance on future trends.
Capital redistribution keeps altcoins under pressure
According to an analyst on Twitter, altcoins remain in a stalled phase, with limited liquidity flowing into these assets. This has inherently delayed the much-anticipated altseason, during which altcoins typically see significant upward momentum.
Source: X
Charts presented revealed that altcoin market capitalization—represented on the right—has barely surged, with the same just slightly above $1.6 trillion. This seemed comparable to the peaks observed during the 2021–2022 altcoin rally.
On the contrary, Bitcoin exhibited a different trend. Its market capitalization has nearly doubled since hitting its previous all-time high in 2022, with the same now exceeding $2 trillion.
This means that the current market cycle is being led by Bitcoin, with the majority of new investment capital directed towards it, rather than altcoins. This shift can be attributed to the entry of institutional investors, with the launch of Spot Exchange-Traded Funds (ETFs) in the United States.
The stagnation of altcoin market capitalization suggests that funds are merely rotating between different altcoins, with little to no new liquidity making its way into the market.
If this trend persists, it would mean that the altseason will remain delayed. Altcoins may see only minor gains or isolated rallies based on prevailing market narratives.
Meanwhile, the broader cryptocurrency market has also seen a sharp decline in liquidity. According to Glassnode’s Aggregate Realized Value Net Position Change metric, which measures liquidity inflows and outflows, liquidity has dropped by 49% over the past month, falling from $134 billion to $68 billion.
Source: Glassnode
This liquidity crunch is evident in the market’s overall state, as many altcoins are yet to recover to their previous all-time highs, last reached in late 2024.
High Bitcoin dominance delays altcoin momentum
A key indicator for an altcoin rally has traditionally been a significant decline in Bitcoin dominance, often followed by successive market-wide gains for altcoins.
Bitcoin dominance measures the proportion of the total cryptocurrency market capitalization held by Bitcoin relative to altcoins. When Bitcoin dominance increases, altcoins typically underperform as capital flows back into Bitcoin. This trend is currently evident in the market.
At press time, Bitcoin dominance on CoinMarketCap stood at 56.72% – a relatively high value. A drop to around 45% would point to a shift in market control towards altcoins, potentially sparking an altcoin rally.
However, until key metrics such as Bitcoin dominance, capital inflow into the market, and liquidity in altcoins improve, the long-anticipated altseason will remain delayed.
Conclusion
The ongoing stagnation of the altcoin market signals a critical phase for investors. With Bitcoin’s dominance remaining high and liquidity shortages becoming evident, the prospects for a vibrant altseason appear muted in the short term. Investors are encouraged to monitor key market indicators as they reflect broader market health and potential recovery trajectories.
