Is this time different? Expert explains why altcoins are underperforming

By Finbold | Created at 2024-11-27 18:16:41 | Updated at 2024-11-27 20:50:06 2 hours ago

Altcoins have been underperforming this cycle, raising doubts on whether this time will be different from previous altseasons. A crypto expert and onchain analyst provided one explanation of why it could be happening, looking at market dynamics.

Previously, a market bull cycle was made of Bitcoin (BTC), reaching new highs and money rotating to altcoins. This dynamics created what analysts call an “altseason,” when other cryptocurrencies outperform Bitcoin, sending its market dominance downwards.

On November 27, Ki Young Ju, CEO and analyst at CryptoQuant, noted that altcoins’ market cap lags behind that of Bitcoin. According to him, this is caused by a significant change in the demand for Bitcoin – away from spot exchanging.

“Compared to the last cycle, the nature of capital flowing into Bitcoin has shifted. The altcoin market cap below its previous ATH indicates reduced fresh liquidity from new exchange users. For altcoins to reach a new all-time high market capitalization, they will require a significant influx of fresh capital to crypto exchanges.”

– Ki Young Ju

Why is an altcoin season delayed, and what’s next from here?

Since 2023, BTC volume and demand have been higher at derivatives like futures, exchange-traded funds (ETFs), and MicroStrategy’s (NASDAQ: MSTR) convertible bonds strategy. As Ki explained, the higher volume of traditional finance products makes capital rotation to crypto-native assets harder and slower.

Not only that, but the investors’ profile is also different. People who buy ETFs and MSTR stock to gain exposure to Bitcoin are not the same ones who buy BTC spots or other cryptocurrencies in decentralized finance (DeFi).

“Unlike crypto exchange users, institutional investors and ETF buyers have no intention of rotating their assets from Bitcoin to altcoins. While institutional investors might allocate funds to major altcoins via ETFs or investment vehicles, minor altcoins still rely on crypto exchange users to buy them.”

– Ki Young Ju

Therefore, altcoins must find different ways of attracting fresh capital to the crypto landscape, not relying on Bitcoin’s surge. “Altcoins should focus on developing independent strategies to attract new capital rather than relying on Bitcoin’s momentum,” CryptoQuant CEO concluded.

This time might not be that different

Nevertheless, other analysts have shown a more optimistic outlook regarding altcoins and the altseason cycle. As Finbold reported, TechDev highlighted an ongoing pattern from the previous two cycles that could have started this week.

According to him, the last two altseasons started after three consecutive weekly closes above the last Bitcoin weekly high. This pattern is in play right now, with the third consecutive week closed last Sunday.

In the meantime, Alex Svanevik predicts 2025 to be “the mother of all bull markets” and Miles Deutscher expects “the biggest crypto bull run ever.” While Ki Young Ju believes that only a few altcoins will shine this cycle, Alex Becker seems to agree, looking at utility altcoins as “the easiest and surest” upcoming growth potential.

Featured image from Shutterstock.

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