The 2024/5 post-halving market cycle has been a weird one for the bottom feeders who ride Bitcoin’s coattails; Bitcoin has demonstrated remarkable strength, significantly outperforming most alternative cryptocurrencies.
If you’ve been around the block or hung out with your friendly neighbourhood crypto bro, you should be familiar with the narrative. A few months after the Bitcoin halving, the market adjusts to the supply constraints, and we have an epic repricing where Bitcoin goes to the moon.
As Bitcoin breaks new all-time highs, investors rotate into smaller altcoins, and these coins eventually break their all-time highs but to a higher degree than Bitcoin, so load up on alts, and you’ll get to ride the wave amplified by 2,5,10x more.
The halving has come and gone; Bitcoin has broken through $100 000, and yet altcoins haven’t broken their previous all-time highs and are continuing to see new all-time lows when priced in Satoshis.
This divergence has puzzled many investors who expected the rising Bitcoin tide to lift all crypto assets equally.
So you’re sitting with a heavy bag full of crap that is crab-walking to nowhere, wondering where has all the liquidity gone?
Let’s take a look, shall we?
Corporate Treasury Allocations
Major corporations have continued to add Bitcoin to their balance sheets as an inflation hedge and alternative to cash reserves. These entities are hungry Hippos and typically avoid altcoins entirely due to their higher volatility, regulatory uncertainties, and the additional due diligence required.
So far, we’ve seen MSTR continue to expand their treasury pile of Bitcoin along with Japan’s MetaPlanet, Kulr, Rumble and a few others as the Bitcoin balance sheet play starts to take hold, thanks to the example of Michael Saylor.
Bitcoin’s Institutional Adoption Has Accelerated
Stocks like MicroStrategy (MSTR) command a premium due to their leveraged Bitcoin acquisition strategies, offering investors indirect exposure to Bitcoin’s price movements through traditional stock markets.
By utilising debt and equity to accumulate substantial Bitcoin holdings, these companies amplify potential gains (and losses) relative to Bitcoin’s volatility, attracting investors seeking simplified access to the cryptocurrency.
This strategy, coupled with strong market sentiment and limited alternative investment vehicles within traditional brokerages, fuels demand and elevates stock prices, though it also introduces significant risks associated with leverage and Bitcoin’s inherent price fluctuations.
These plays become interesting to those looking for Bitcoin exposure but via a traditional brokerage, meaning Bitcoin gets to enjoy this indirect demand while altcoins are completely ignored.
ETF Approval and Institutional Investment
One of the most significant developments in this cycle has been the approval of Bitcoin spot ETFs in the United States. These financial products have provided traditional investors with regulated exposure to Bitcoin without the complexities of direct cryptocurrency ownership.
Since their launch, these ETFs have seen billions of dollars in inflows, creating substantial buying pressure specifically for Bitcoin.
Institutional investors have generally exhibited a preference for Bitcoin over altcoins due to its:
- Longer track record and established market position
- Greater regulatory clarity compared to most altcoins
- Higher liquidity and more developed market infrastructure
- Brand recognition and simpler value proposition
Securities Classification Concerns
The ongoing debate about whether certain cryptocurrencies qualify as securities has created significant uncertainty in the altcoin market.
The SEC has pursued enforcement actions against several prominent projects and exchanges, suggesting many altcoins may be unregistered securities. This regulatory cloud has made institutional investors and even some retail participants hesitant to accumulate altcoins.
Bitcoin, in contrast, is increasingly viewed by regulators, courts, and market participants as a commodity rather than a security, providing greater clarity and confidence for investors.
Exchange Delistings and Reduced Liquidity
Regulatory pressures have forced many exchanges to delist certain altcoins or limit their availability to specific jurisdictions. Yes, you can still find a local shitcoin casino or go off and gamble with on-chain dex’s, but this requires some level of expertise and willingness to learn.
Retail doesn’t have time for that; they just want to go to a local fiat on-ramp and buy whatever they have in stock; if you can’t get on those platforms, you’re not going to catch a bid.
As exchanges reduce their altcoin pairs, liquidity for many altcoin markets is reduced, making them less attractive to investors concerned about execution costs and the ability to exit positions efficiently.
Digital Gold Thesis Strengthened
Economic uncertainty, inflation concerns, and geopolitical tensions have reinforced Bitcoin’s “digital gold” narrative. During periods of macroeconomic stress, Bitcoin has increasingly been treated as a safe-haven asset within the cryptocurrency ecosystem, drawing capital away from more speculative altcoin investments.
Now that the idea of countries stockpiling Bitcoin is out in the open, the idea of Bitcoin as digital gold continues to crystalise in the minds of the boomers and Gen X’ers.
Diminished “Bitcoin or Ethereum Killer” Narratives
Previous market cycles saw significant capital flow to Layer 1 blockchain projects positioned as potential “Ethereum killers.”
However, this narrative has lost momentum as Ethereum has successfully navigated its transition to proof-of-stake while maintaining its dominant position in DeFi, NFTs, and smart contract applications.
Hilariously, even Ethereum has underperformed Bitcoin in the current cycle, suggesting a broader shift in market dynamics rather than project-specific concerns.
Crypto Lending Collapse and Deleveraging
The collapse of major crypto lending platforms in previous years led to widespread deleveraging in the cryptocurrency ecosystem. This deleveraging disproportionately affected altcoins, as investors seeking to reduce risk typically sell their most speculative assets first.
When you consider that FTX, BlockFi, and Celsius have burned a lot of creditors, to name a few, while the issuance of funds post-bankruptcy continues, you can understand why enthusiasm for leverage has waned to such an extent. Â
Reduced Retail Speculation In Utility & focus on Meme mania
The current cycle has featured less retail speculation on your L1 and utility tokens than in previous bull markets.
The meme coin and small-cap altcoin frenzies that characterised previous cycles have been relatively subdued, with fewer new participants entering the market solely for short-term rug pull and pump and dumps.
When I say short-term, I am talking about a day or two or, at most, a week! The degens have really shorted their time horizons and binned any thesis; it’s all about catching the next meme wave.
While tokens like Solana do benefit as they are the platform where these memes are launched, these meme tokens don’t drive consistent volume; they are just flash-in-the-pan peaks.
Most people who are not completely dumb money are sticking to the Orange Coin. This shift in market composition toward more sophisticated investors has benefited Bitcoin, which is often perceived as the lower-risk entry point into cryptocurrency investing.
Diminishing Returns on New Blockchain Technology
Many altcoins rise to prominence by promising technological innovations that will supposedly revolutionise the blockchain space.
However, the market has become more discerning about such claims, recognising that truly transformative blockchain innovations are increasingly rare.
The incremental improvements offered by newer altcoin projects have failed to generate the same excitement and capital inflows seen in previous cycles.
Meanwhile, Bitcoin has seen significant development with improvements like Taproot and the growth of Layer 2 solutions such as the Lightning Network. These advancements have addressed some of Bitcoin’s previous limitations without requiring investors to venture into altcoin markets for specific use cases.
Bitcoin’s Own Shitcoin Ecosystem
If I am going to scrape by on the margins, Ordinals have had their impact on the market. The emergence of Ordinals and BRC-20 tokens has also brought NFT and token functionality directly to Bitcoin, potentially reducing the need for separate blockchains specialised for these purposes.
While this is not anything special, it does have an impact on the fringes, as some degens would now spend their money purchasing Bitcoin and these useless tokens instead of your alternative blockchain tokens, reducing demand for those assets.
Investment Theses Have Matured
As the cryptocurrency market has matured and is less retail-driven, the class of investors have become more sophisticated in their analysis of risk-adjusted returns.
Risk-Adjusted Returns Favour Bitcoin
While altcoins offer the potential for higher percentage gains, their significantly higher volatility and failure rate have made many investors question whether the additional risk is justified.
Historical data increasingly suggests that for many investors, a Bitcoin-heavy portfolio with selective altcoin exposure may optimise long-term risk-adjusted returns.
Value Accrual Mechanisms Under Scrutiny
Investors have become more critical of how value accrues to tokens. Many altcoins have struggled to demonstrate how token price appreciation is fundamentally linked to the success of their underlying projects or ecosystems.
In contrast, Bitcoin’s straightforward value proposition as a decentralised, scarce digital asset makes its value accrual mechanism more intuitive and compelling.
What Does This Mean for Altcoins?
The short answer is you’re cooked!
Maybe if you come in late, catch some wave, and ride it up in the short term, but if you’ve been a long-time bag holder of altcoins, you’re likely to end this cycle disappointed.
Maybe you are one of the lucky ones, and you can get out in time to make some US profit, but as for the goal of buying an altcoin to sell for Bitcoin and secure more satoshis, I think you’ll have to let that dream go and move on.
The underperformance of altcoins doesn’t necessarily indicate a permanent shift in the cryptocurrency ecosystem. Previous market cycles have often featured periods of Bitcoin dominance followed by “altcoin seasons” where alternative cryptocurrencies outperform.
So, I can’t say a repeat performance has zero chance of materialising, but we have to look at what tailwinds are required for altcoins to recapture market interest and capital flows; several developments may be necessary:
- Greater regulatory clarity that reduces uncertainty for investors
- Some large corporations or nation-states backing “digital assets” baskets instead of Bitcoin Strategic Reserves
- Demonstrated utility that drives genuine demand beyond speculation, which is never going to happen
- Sustainable tokenomics that create long-term value for holders, a scenario that is never going to happen.
- Technological innovations that address real-world problems at scale are not totally impossible but so unlikely that we might as well say they are impossible.
- Improved market infrastructure that makes altcoin investment more accessible and secure, such as a green light on a host of crypto spot ETFs
Do I think any of this is going to happen? Nah!
All Your Models Are Destroyed, Completely Devasted As Bitcoin Goes To The Moon
The relative underperformance of altcoins in the current market cycle reflects a maturing ecosystem where investor preferences are increasingly shaped by risk considerations, regulatory concerns, and more sophisticated value assessments.
Suppose you want to gamble to secure additional alpha on Bitcoin’s price action in this cycle. In that case, you now have Bitcoin-ish securities offering you enough volatility and liquidity instead of wasting your time trying to hop in and out of small-cap altcoins with a razor-thin order book.
While Bitcoin’s dominance has been a defining characteristic of this cycle, the cryptocurrency market remains unpredictable, and none of us can predict what will happen next.
Perhaps a new narrative takes hold; we do have a strong end to 2025, where Bitcoin continues to smash new records, and we move into a full risk-on, brain-off period where everything blockchain catches a bid once again.
