Altcoins have experienced one of their worst sell-offs in years, with over $460 billion wiped out in days. As Bitcoin’s dominance reaches multi-year highs, investors are left wondering whether another altseason is on the horizon or if liquidity will remain locked in BTC.
Altcoins Under Pressure
The global financial markets were hit by a flash crash on February 3 after former U.S. President Donald Trump announced new tariffs on China, Canada, and Mexico. The ripple effect was felt across stocks, commodities, and cryptocurrencies, with altcoins suffering the biggest blow.
By the end of January, the total altcoin market cap stood at $1.46 trillion, but by February 3, it had plunged to $1 trillion—a staggering 31.5% decline. Although the market has since recovered to $1.22 trillion as of February 5, it remains significantly below its January levels and its all-time high of $1.71 trillion from November 2021.
The CMC Altcoin Season Index, which tracks the performance of the top 100 altcoins relative to Bitcoin, currently sits at 36—down from 87 in December 2024. A reading above 75 signals a full-fledged altcoin season, making the current market conditions unfavorable for altcoins.
Bitcoin’s Growing Dominance
Bitcoin now accounts for 61.5% of the total crypto market cap, the highest since early 2021. This means that for every dollar invested in crypto, over 61 cents go into Bitcoin, leaving only 39 cents for thousands of altcoins.
Bitcoin’s dominance has historically surged during market uncertainty. The collapse of FTX in 2022 saw investors shift funds into Bitcoin, pushing its market share from 40% to over 64%. A similar pattern is playing out now, with institutions driving Bitcoin accumulation.
Since the approval of spot Bitcoin ETFs in January 2024, institutional investors have poured over $120 billion into Bitcoin through funds managed by BlackRock, Fidelity, and Grayscale. Additionally, discussions around Bitcoin as a strategic reserve asset for the U.S. government could further delay capital rotation into altcoins.
What Needs to Change for an Altcoin Rally?
Historically, crypto market cycles follow a predictable pattern: Bitcoin rallies first, then stabilizes, allowing liquidity to flow into altcoins. This happened in 2017 and 2021 when Bitcoin’s dominance peaked before capital rotated into Ethereum and other major altcoins.
For this cycle to repeat, Bitcoin would need to stabilize, and its dominance would have to decline below key support levels. Catalysts such as Ethereum upgrades, regulatory clarity, or broader adoption could accelerate this process.
However, with institutional investors prioritizing long-term Bitcoin holdings over speculative altcoins, the traditional rotation into alts may take longer than in previous cycles.
On-Chain Speculation Disrupting the Altcoin Market
Analyst Miles Deutscher suggests that on-chain speculation, particularly through Pump.fun, is significantly impacting altcoin markets.
In previous cycles, speculative capital flowed into top 200 altcoins on centralized exchanges. Now, much of that liquidity is being directed toward low-cap on-chain tokens, many of which lack proper liquidity and stability.
This shift has led to an uneven market, where insiders profit while latecomers suffer heavy losses. Many of these illiquid memecoins have already retraced 70–80%, further suppressing broader altcoin momentum.
Regulatory uncertainty has also pushed traders to alternative speculation methods, reducing capital inflows into more established altcoins.
Bitcoin’s Repricing and Ethereum’s Quiet Accumulation
While altcoins struggle, some analysts argue that Bitcoin remains undervalued.
“The market is mispricing Bitcoin—its fair value is easily $50K–$100K higher,” says analyst The Bitcoin Therapist, suggesting that a sharp repricing event could be imminent. If true, Bitcoin dominance may stay elevated for much longer than expected.
Ethereum, meanwhile, is quietly seeing significant accumulation from major players. Reports suggest that Donald Trump’s World Liberty Financial project has purchased $200 million in ETH, while Fidelity and BlackRock have accumulated a combined $349.75 million in ETH.
Historically, Ethereum’s outperformance against Bitcoin has been a leading indicator of an altseason. If ETH gains strength, it could signal the start of capital rotation into large-cap altcoins, which would eventually trickle down to smaller projects.
For now, however, Bitcoin’s dominance remains unshaken, keeping altcoins in a holding pattern as investors wait for the next major shift in market dynamics.
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