Selective Altcoin Season Emerges Amidst Market Liquidity Constraints and China’s Economic Uncertainty

• The highly anticipated altcoin season has started, but analysts warn that this cycle is distinct from previous ones, characterized by limited liquidity and selectivity.

• Recent trading data indicates that the volume of altcoin trading has surged to 2.7 times that of Bitcoin, yet the overall market shows no signs of a widespread rally.

• “It’s a very selective alt season…Only a few coins are pumping,” said CryptoQuant CEO Ki Young Ju, emphasizing the competitive nature of the current market.

This article explores the recent developments in altcoin trading, including constraints on liquidity, selective gains, and the implications of China’s economic policies on crypto markets.

Analyst Calls Altcoin Season—But Not as Expected

As noted by Ju, the current alt season is being fueled primarily by stablecoin holders rather than traditional Bitcoin traders, highlighting a shift in market dynamics. With liquidity remaining constrained, the trading environment remains competitive.

In a recent analysis shared on social media, Ju highlighted that the surge in altcoin trading volumes is significant, currently standing at 2.7 times that of Bitcoin. However, he strongly asserts that this movement is not indicative of a broad-based rally.

“It’s a very selective alt season…Only a few coins are pumping. With no fresh liquidity, it feels like a PvP fight over a fixed pie,” he wrote, underlining the challenging nature of this phase.

This assertion is consistent with Ju’s earlier warnings that the altcoin market operates as a zero-sum game; it’s about capital shifting within existing assets rather than new funds entering the space. In December, he suggested that this distinct alt season would be “weird and challenging,” allowing only a select few assets to thrive.

“Altcoins used to move together based on correlation with BTC, but that pattern has now broken. Only a few are starting to show independent trends as they attract new liquidity,” Ju stated.

While some traders express optimism about these developments, skepticism remains. A user on X questioned the definition of alt season, pointing out that if only a handful of tokens are performing well, it may not be indicative of a robust alt season.

China’s Fiscal Moves and Crypto Markets

Amid these discussions, China’s recent economic policies have stirred speculation about their potential impact on the crypto market. Some analysts suggest that adjustments in China’s fiscal strategy could lead to beneficial effects on global liquidity, ultimately benefiting cryptocurrencies.

However, caution is advised as analysts clarify that China has not actually injected new capital into its economy. Instead, adjustments to its M1 money supply will reflect demand deposits and prepaid funds starting in 2025.

“They didn’t inject new capital. They ‘recalculated’ it to include other deposits and funds. There is no fresh print,” one commentator on X emphasized, indicating a lack of actual new liquidity.

Local media corroborates these assertions, stating that the People’s Bank of China’s changes pertain to how it reports monetary supply, rather than a true increase in liquidity. NFT Bear, a crypto and DeFi researcher, pointed out that while this resulted in a considerable increase in the M1 supply, it should not be misconstrued as new funds entering the market.

Historical analyses draw parallels to the U.S.’s rapid increase in M1 during 2020, which significantly boosted altcoin market capitalizations. While China’s recent changes differ notably, some traders speculate that even minor inflows could trigger a renewed bullish sentiment in the crypto sector.

“Whether or not this translates into another explosive crypto rally remains to be seen. But one thing’s for sure: when a major world economy infuses liquidity—no matter how it’s framed—financial markets take notice, and crypto often leads that charge,” NFT Bear opined.

Despite the prevailing uncertainty, certain altcoins have demonstrated resilience. Assets like Sei (SEI), Sui (SUI), Zksync (ZK), and Story (IP) have shown notable performance, hinting at emerging narratives within the space.

Whether these gains represent lasting trends or temporary fluctuations within a fragmented market is yet to be determined. Nonetheless, analysts are in agreement that conventional metrics traditionally used to define altcoin seasons no longer apply.

The crypto landscape is rapidly evolving, with Bitcoin gaining a status akin to traditional financial assets through ETFs (exchange-traded funds) and institutional backing. The once-clear BTC-to-altcoin capital rotation has been replaced by independent narratives and utilities emerging among altcoins.

Conclusion

To summarize, the current altcoin season presents unique challenges and opportunities distinct from previous market behaviors. Analysts emphasize that selectivity in trading, combined with the ramifications of geopolitical economic shifts, could reshape the market landscape. Investors should remain vigilant, as adaptation to these changes will be critical for navigating future market conditions.