The current market is arguably experiencing a major shift as the current Bitcoin rally is fundamentally bullish due to institutional investors. Ki Young Ju, the CEO of CryptoQuant, has urged altcoins (alts) to cease using Bitcoin’s rally to their advantage and come up with proper signals to attract new capital.
Since altcoins’ total market cap has not reclaimed its previous all-time high, new liquidity is essential to boost the altcoin market and set new records.
Bitcoin’s Rally Led by Institutional Demand
Bitcoin’s current rally stands in stark contrast to the retail-driven speculation cycles of the past. Currently, institutional investors and spot ETFs control the capital flow, thus driving Bitcoin’s price.
These investors, operating outside traditional cryptocurrency exchanges, often focus on long-term holdings rather than short-term trading, making them less likely to rotate their capital into alts.
This shift has threatened the future of small alts that have long depended on exchange retail liquidity for their gains. While Bitcoin enjoys funded institutional support, which keeps its price relatively stable, altcoins continue to survive on the thin retail investor base for trading activity.
Ki Young Ju, the CEO of CryptoQuant, pointed out that for altcoins to sustainably rebound, the new capital must flow in through exchange trading activity, potentially due to the trigger of FOMO by retail investors.
Even though institutional investors can invest in major altcoins using ETFs or other products, minor altcoins cannot attract such funding. Without increased capital inflows from exchange users, altcoins will remain far from their previous market highs, limiting their ability to participate in the broader crypto market rally.
Altcoin Market Faces Liquidity and Saturation Challenges
The cryptocurrency market capitalization also declined to $3.15 trillion and has since been recovering to reach $3.22 trillion due to buyers’ sentiments. However, despite Bitcoin’s surge, altcoins have struggled to maintain steady growth. Altcoins often end up having price corrections once Bitcoin surges.
Previously, the alts were seen to be more profitable during a bullish run than Bitcoin because they have less trading volume and thus more volatility.
However, given that there is a large number of alts in the market, investors have been putting in their money in several projects thus spreading their capital to different tokens.
This is increasingly becoming a challenge due to meme coins, as they are diverting the attention of retail investors and liquidity toward them instead of other altcoins.
In the past, leveraged trading was a major driver of altcoin activity, but retail traders are now increasingly focused on high-risk, high-reward meme coins. For alts to succeed in the current market, they must demonstrate strong fundamentals, clear use cases, and the ability to attract sustainable liquidity.
Revamping the Techniques of Altcoin Development
Altcoins should stop relying on Bitcoin and prioritize developing unique value propositions. Unlike Bitcoin, which continues to benefit from institutional adoption, alts need innovative strategies to attract new capital and gain investor trust. This includes fostering strong developer ecosystems, forming strategic partnerships, and enhancing token utility within their platforms.
Bitcoin’s recent pullback gave alts a brief opportunity to catch up as investors sought more profitable alternatives. However, industry experts remain cautious about a large-scale altcoin rally, particularly with the dominance of Bitcoin in institutional portfolios.
In addition, James Butterfill, head of research at CoinShares, expressed doubt about altcoins surpassing their 2021 highs, especially if regulatory shifts or governmental Bitcoin adoption initiatives, such as the proposed national Bitcoin reserve by a potential Trump administration, materialize.
In a different development, Maya Parbho, a presidential candidate in Suriname, announced plans to recognize Bitcoin as legal tender, further reinforcing Bitcoin’s role as the dominant cryptocurrency.
