Bitcoin’s Surge Amid Altcoin Struggles: Analyzing Market Fragmentation and Sustainability Risks

• Bitcoin’s recent surge raises intriguing questions about the overall health of the cryptocurrency market, especially as altcoins struggle to keep pace.

• While Bitcoin [BTC] captures headlines with its price gains, the altcoin market faces an unprecedented divergence, revealing underlying weaknesses.

• “This rally isn’t built on solid foundations,” warns a COINOTAG analyst, emphasizing concerns regarding market stability.

A recent Bitcoin rally raises concerns about market fragmentation as altcoins falter, leading analysts to question the sustainability of these gains.

Altcoin correlation crumbles as Bitcoin climbs

Bitcoin’s ascent is no longer lifting all boats in the crypto sea.

Source: Alphractal

The 14-period rolling correlation between BTC and major altcoins has sharply declined since late April 2025, signalling trouble.

Unlike previous price surges where altcoins surged alongside Bitcoin, the trend has shifted dramatically. Most altcoins are now exhibiting near-zero or negative correlation on the 12-hour timeframe.

This disconnection is illustrated by cooler blue shades on the correlation heatmap, indicating a narrowing market landscape.

A Bitcoin-led rally often lacks lasting strength and may foreshadow a broader risk-off shift in market sentiment.

Dominance reclaimed

The climb in Bitcoin’s price has not only boosted its own market standing but has also spurred a significant resurgence in overall market dominance, especially when considering stablecoins.

The combined dominance has approached 70%, reflecting a risk-off behavior and a consolidation of capital into perceived “safer” crypto assets.

Source: Alphractal

Despite BTC’s rising market dominance, it remains below its 2021 peak. The inclusion of stablecoins in the dominance metrics suggests that traders are remaining cautious and waiting for clearer market signals.

Source: Alphractal

Interestingly, despite the positive price action, changes in BTC dominance have consistently trended negative, highlighting a continued capital rotation and a prevailing indecision within the market.

Whales on thin ice

The rally appears largely influenced by institutional investors consolidating capital into BTC and stablecoins rather than any widespread bullish sentiment.

As Bitcoin hovers near all-time highs, risks are heightened; the gains in dominance seem to be stalling as momentum wanes.

If institutional buying slows or external market factors tighten, a sharp market correction could occur.

Thin liquidity, cautious retail participation, and reliance on whale-driven flows create a precarious environment for the current market setup.

Without fresh capital entering the market, this rally risks dissipating as quickly as it has emerged.

Conclusion

As Bitcoin continues to exhibit a strong performance amid altcoin struggles, the concerns regarding market sustainability are increasingly prominent. Analysts advocate for caution and better risk assessment going forward, as the indicators suggest an unstable scenario that could shift at any moment.