Original | Odaily Planet Daily ( @OdailyChina )
Author: Golem ( @web3_golem )
In the early hours of this morning, BTC rose to 73650 USDT in a short period of time, which is only 130 USDT away from the previous high of 73787.1 USDT in March this year. BTCs market share also broke through 60% (currently falling back to around 58.7%). According to Coinglass data, as of 16:00 today, the BTC long-short ratio was 1.0576. From the perspective of market sentiment, bulls believe that BTC will break new highs in the short term. Major blockchain media have also prepared articles in advance, and BTC will be great again.
However, although the BTC price has broken through continuously since yesterday and is about to reach a new high, the altcoin market has performed mediocrely.
According to Quantify Crypto data, the price of BTC rose from $63,327 to above $72,000 in October, an increase of about 14%. However, among the top 200 cryptocurrencies by market value, only 73 tokens, except BTC, rose in October, while the remaining 126 tokens are still in a state of decline, including TON, PEPE, LDO, OP, ARB, etc.
So, can altcoins follow BTC in this round of market? Odaily Planet Daily will try to analyze the reasons why altcoins collectively do not perform well compared to BTC in this article.
BTCs upward momentum mainly comes from ETFs and institutional purchases
The biggest difference between this round of crypto cycles and previous ones is the approval of the US Bitcoin spot ETF and the entry of more institutions, and the general bullishness on Bitcoin . According to Farside Investors data, the US spot Bitcoin ETF had a net inflow of US$23.363 billion as of October 29, equivalent to a net inflow of 323,600 BTC. If the US spot Bitcoin ETF is compared to a huge exchange, its BTC wallet balance has far exceeded OKX, ranking behind Coinbase and Binance.
At the same time, the approval of the US spot Bitcoin ETF has also brought a large number of institutions to buy BTC. Many well-known global listed companies have included Bitcoin in their balance sheets. Recently, the global Internet giant Microsoft also said that it will discuss whether to invest in Bitcoin research to hedge against inflation and other macroeconomic impacts at the next shareholders meeting. Moreover, compared with retail investors, institutional investors are less likely to make short-term operations due to market sentiment, which is more beneficial to the price of Bitcoin.
However, the rise of BTC, which is mainly caused by ETFs and institutional purchases, is difficult to radiate funds to the altcoin market. The reason is that the altcoin market is generally volatile and the regulation is unclear, and institutional investors prefer stable and regulatory-friendly Bitcoin. Although the passage of the Bitcoin spot ETF has also brought a lot of new retail funds to the crypto market, these new funds will not flow into the altcoin market. Moreover, for new players, investing in crypto ETFs is more familiar and convenient than investing directly in cryptocurrencies. Therefore, the existence of crypto ETFs is more likely to draw new funds that should have flowed into the altcoin market in the bull market.
VC coins face a crisis of trust, and the Meme market sucks away funds in the market
Another prominent feature of this cycle is the crisis of confidence in VC coins, and people have chosen to embrace the Meme market. Players in the altcoin market are essentially focused on making money. In the past, if a project had a well-known VC investment platform, it would be a boon to both the coin flipping and the secondary market. But now people are gradually realizing that VC coins have a common problem of high valuation and low liquidity.
Due to various narratives and exit requirements, VCs raise the valuation of tokens before they are listed, and then sell early low-priced chips to the market after the tokens are listed on the exchange. Due to the low circulation rate of altcoins, prices inevitably fall all the way. Not only are retail investors unable to make profits under the high valuation of tokens, they also become the ultimate taker. Therefore, investors gradually lose confidence in VC coins.
At the same time, the huge amount of VC coins unlocked in succession has further depressed the price of altcoins in the market under the condition of slow growth of incremental funds and loss of confidence in existing funds. For example, Celestia will unlock 175.59 million TIA at 22:00 Beijing time tonight , worth about US$900 million, accounting for 79.91% of the current circulating supply. Even if the tokens that have been traded in the OTC market are removed, there are still 92.3 million TIAs that will flow into the market, about US$460 million. In the current market, very few people are willing to take the initiative to take over.
Under such circumstances, investors embraced the relatively fair Meme market. Although the Meme market currently also has problems such as serious PVP phenomenon, rampant conspiracy groups, and short token life cycle, for investors, this is also picking the tallest among the short ones and there is nothing they can do about it.
From the data point of view, the total market value of Meme coins on Solana was raised to over $12 billion yesterday, setting a record high. According to DefiLlama data, the TVL of CDP and RWA sectors are $8.048 billion and $7.022 billion respectively. The interest of on-site funds in Meme coins is surpassing the altcoins under the VC-dominated narrative.
Altcoins are struggling to catch their breath under heavy regulatory pressure
Another widely accepted reason for the poor performance of the altcoin market is the regulatory pressure faced by the crypto industry in 2024. In 2024, the SEC fined $4.68 billion in the crypto field, an increase of 3018% compared to 150.26 million yuan in 2023. At the same time, many leading crypto companies were charged by the SEC this year, including Binance, Coinbase, ConsenSys, Uniswap and OpenSea.
Compliance and regulatory pressures have hindered the trading and promotion of the altcoin market. In many countries and regions, BTC has been recognized by regulators and people can trade BTC according to the law, but most altcoins do not have such a regulatory environment and are still struggling to prove that they are not securities and legal. Even stablecoin giants like Tether experienced a short-term decoupling when the Wall Street Journal disclosed that the U.S. Treasury Department is considering imposing sanctions on Tether and the government did not come forward to confirm it. You can imagine what kind of regulatory pressure the crypto market is under now.
Regulatory pressure is also the main reason why the crypto industry is generally concerned about the US election. Consensys even sent a letter to the future US president in advance, calling for friendly regulation of the crypto industry. If the new president has a friendly policy attitude towards crypto, it may boost the confidence of retail investors and even institutional investors in altcoins.
Innovation progress of altcoin projects eases
Although the current primary market financing is still relatively prosperous, the innovation progress of altcoin projects is still slow, the narrative is stagnant, and the projects have not kept up with the pace of industry and market sentiment in terms of technology and narrative innovation. Ethereum founder Vitalik is still sorting out the future development roadmap of Ethereum, and projects in the ecosystem are still stacking blocks with narratives such as L2, LST, and Restaking. Other ecological protocols are also basically built around these narratives.
In the current environment, investors have gradually become desensitized to projects packaged in these narratives, and these projects have accumulated sufficiently high bubbles, with less room for growth. Without sufficient new technological innovation or narrative innovation support, the market competitiveness of altcoins, especially old altcoins, will continue to decline.
Previous encryption cycles may have failed
Looking back at previous bull markets such as 2017 and 2021, the crypto market shows a cyclical nature of Bitcoin rises, then altcoins rotate. When Bitcoin continues to break through highs with strong growth, it triggers high market sentiment and increases user risk appetite, and altcoin bull market will come.
But we may not be able to do this again in this round, and the previous crypto cycle may become invalid. As mentioned earlier, the approval of the Bitcoin spot ETF and the entry of more rational institutional investors, the tightening of regulatory policies, the loss of confidence of retail investors in altcoins, and the birth of fair, low-cost, and barrier-free coins such as Meme coins and Inscriptions all make this cycle special.
The result may be that even if BTC breaks through its previous high and continues to rise, the situation in the altcoin market may not improve. Instead, some new areas such as Meme coins, inscriptions, and Bitcoin ecology will get opportunities.
Conclusion: I hope the above analysis is wrong
Of course, the butt determines the head. Although the altcoin market is currently performing poorly, at the moment when Bitcoin is about to break through a new high (or perhaps a reversal), we still hope that altcoins can perform well. When looking at todays data, BTCs rise has led to the recovery of some altcoins. According to Quantify Crypto data, among the top 200 cryptocurrencies in market capitalization today, 130 tokens have recovered, and 70 tokens are still in a state of decline, among which DOGE rose 3.68% today, and SUI rose 8.63% today.
But taking a step back, in the current market situation, Bitcoin is dancing alone, and the markets FOMO sentiment towards altcoins is not good, causing the prices of altcoins to gradually return to their value. This de-bubble process may also be part of the bull market plan.
