Author: Crypto, Distilled , Crypto KOL
Compiled by: Felix, PANews
TL;DR: Reasons include project saturation, token oversupply, increasing market intelligence, and Bitcoin ETFs breaking the traditional alt-season path.
After Bitcoin halving , Altcoin all soared, which is a "rule" in previous bull markets, but the much-anticipated "altcoin season" has not yet appeared. Crypto KOL Crypto, Distilled analyzed the reasons for this phenomenon and provided investors with suggestions for optimizing strategies.
What is "Copycat Season"?
When Altcoin outperform Bitcoin and prices surge across the board, it’s called the altcoin season. This is a period of booming growth driven by optimism, just like a rising tide lifts all boats. The Altcoin season has driven the development of almost all sectors, and the massive influx of liquidity into the market is its driving force.
Liquidity Tracking
Historically, liquidity has come primarily from two sources:
- Retail funds flowing in through centralized exchanges (CEX)
- Outflows from Bitcoin on CEX to Altcoin on CEX
Liquidity then flows down the market cap ranking “ladder.” OGs are well aware of this dynamic, often referring to it as the “Road to Alt Season.”
The Lalapalooza Effect
The 2021 "copycat season" was clear, but now it has disappeared. The author believes that the reasons are multifaceted and are the result of the combined effect of several factors.
The power of a single factor is not enough to change too many things. But when they combine and exert influence in the same direction, the effect is huge. The famous investor Charlie Munger described this effect as the "Lalapalooza effect." (Note: The Lalapalooza effect refers to the effect of multiple interconnected factors in the same direction superimposed to produce a strong amplification effect)
What impact do all these factors combine to produce?
1. Project saturation
Although the market liquidity is abundant, the projects are extremely saturated. Imagine that there are more ships in the sea than waves.
Only certain areas, such as the AI field or the SOL ecosystem, will feel the real wave of the "copycat season". What used to be a "rising tide lifts all boats" has evolved into a selective rotation game, similar to the PvP nature of the "Hunger Games" movie (items roll each other).
2. Token Dilution: The Invisible Handbrake
Token dilution (especially from token unlocks) kills alt-seasons like 2021. This often overlooked factor sucks up a lot of liquidity. No matter how good a project’s technology is, it’s hard for prices to rise if there’s oversupply.
Community user @thor_harvisten conducted a sample survey of tokens launched so far in 2024. The average circulation rate (circulation/supply) of these project tokens is about 14%, and there are about $70 billion worth of tokens waiting to be unlocked.
What happens when oversaturation of projects is combined with an oversupply of tokens? The alt-season is unsustainable.
3. Increased adoption is a double-edged sword
The increased adoption rate in traditional fields is both a good thing and a bad thing. On the one hand, it enhances the credibility of cryptocurrencies; on the other hand, it also makes the field more sensitive. If more smart people turn to cryptocurrencies, it will be more difficult to find industry opportunities.
4. Bitcoin ETF: New Developments
The approval of the Bitcoin spot ETF has changed the landscape of Altcoin. Before the advent of ETFs, the main access channel for Bitcoin was through CEX. This is a good thing for Altcoin, as investors can easily switch from Bitcoin to try Altcoin.
This time, the buyers are different. For those who bought Bitcoin through ETFs, the path to the Altcoin market was not as direct.
5. Impact of COVID-19
Why has 2021 been so unusual for Altcoin? A lot of it has to do with the unique circumstances. During the lockdown, flows and screen time were extremely high, creating the perfect conditions for cryptocurrencies to attract retail investors.
Given the rarity of this situation, it’s reasonable to consider 2021 an outlier. Everyone is still immersed in the high tide of 2021, but the grandeur is gone.
Here’s a quick summary of why Altcoin“disappear”:
- The Altcoin market has shifted from a rapid rise to a rotation game
- As market intelligence continues to improve, finding opportunities requires more effort
- Project saturation, coupled with oversupply, is draining liquidity
- Traditional Altcoin season path broken due to Bitcoin ETF
So in the current market environment, how should users respond?
1. Pay close attention to the fully diluted valuation (FDV) and saturation rate.
2. Keep an eye on ETF developments and areas with heavy institutional participation, such as RWAs. These may have different tracks and even more favorable dynamics over the next few years.
3. In a market flooded with Altcoin, don’t just look at the dollar value of the project. Comparing Altcoin valuations with Bitcoin valuations can more accurately assess Altcoin strength.
4. Work harder to gain an advantage. This is not just about increasing assets, but also about improving knowledge, skills, and connections.
Conclusion
There are still a lot of opportunities in the crypto market, but it requires more effort and a new perspective. The situation is changing rapidly, and those who can adapt quickly are more likely to succeed.
Related reading: Exclusive interview with Shenyu: The main incremental funds come from ETFs, and this round of bull market may not have a copycat season
