Original | Odaily Planet Daily（@OdailyChina）
Author｜Golem（@web3_golem）
In the early hours of today, BTC rose to 73,650 USDT in the short term, just 130 USDT away from the historical high of 73,787.1 USDT in March this year, and the BTC market share also broke through 60% (currently it has fallen back to around 58.7%). According to Coinglass data, as of 4 pm today, the BTC long-short ratio is 1.0576, indicating that from the market sentiment, the bulls believe that BTC will break a new high in the short term, and major blockchain media have already prepared their articles in advance, BTC will be great again.
However, although the BTC price has been breaking through and is about to hit a new high since yesterday, the Altcoin market has been performing flat.
According to Quantify Crypto data, BTC price rose from $63,327 to over $72,000 in October, an increase of about 14%. But among the top 200 cryptocurrencies by market cap, apart from BTC, only 73 tokens saw an increase in October, while the remaining 126 tokens were still in a downtrend, including TON, PEPE, LDO, OP, and ARB.
So in this round of the market, can Altcoins follow BTC to dance, Odaily Planet Daily will try to analyze the reasons why Altcoins have not performed as well as BTC in this article.
The driving force behind BTC's rise is mainly due to ETFs and institutional buying
The biggest difference between this crypto cycle and the past is the approval of the US Bitcoin spot ETF and the entry of more institutions, and the general bullishness on Bitcoin. According to Farside Investors data, the net inflow of the US Bitcoin spot ETF as of October 29 was $23.363 billion, equivalent to a net inflow of 323,600 BTC. If the US Bitcoin spot ETF is considered a huge exchange, its BTC wallet balance has already far exceeded OKX, ranking behind Coinbase and Binance.
At the same time, the approval of the US Bitcoin spot ETF has also brought a large amount of institutional buying of BTC, and many well-known listed companies around the world have included Bitcoin on their balance sheets. Recently, the global Internet giant Microsoft also said it would discuss investing in and researching Bitcoin at the next shareholder meeting to hedge against inflation and other macroeconomic impacts. Moreover, compared to retail investors, institutional investors are less likely to engage in short-term operations due to market sentiment, which is more beneficial to the impact on Bitcoin's price.
But the rise of BTC driven mainly by ETFs and institutional buying is difficult to radiate to the Altcoin market. The reason is that the Altcoin market generally has high volatility and unclear regulation, and institutional investors prefer the more stable and regulatory-friendly Bitcoin. Although the approval of the Bitcoin spot ETF has also brought many new retail funds to the crypto market, these new funds will not flow into the Altcoin market, and for new entrants, investing in crypto ETFs is more familiar and convenient than directly investing in cryptocurrencies, so the existence of crypto ETFs is more likely to draw away the new funds that should have flowed into the Altcoin market during the bull market.
VC coins face a crisis of trust, and the MEME market siphons off on-chain funds
Another prominent feature of this cycle is the crisis of trust in VC coins, and people have chosen to embrace the MEME market. Altcoin market players are essentially all about making money, and in the past, if a project had a well-known VC backer, it was a positive factor for both farming and the secondary market, but now people are gradually realizing that VC coins generally have the problem of "high valuation and low liquidity".
Due to various narratives and exit requirements, VCs inflate the valuation of tokens before they are listed, and after the tokens are listed on exchanges, they sell the early low-priced tokens to the market. Since the circulation rate of Altcoins is low, the price inevitably falls all the way down, and retail investors not only fail to profit under the high valuation, but also become the final "bagholders". Therefore, investors have gradually lost confidence in VC coins.
At the same time, the massive unlocking of VC coins that followed has further depressed the prices of Altcoins in the market, as the growth of incremental funds is slow and the confidence of existing funds is lost. For example, Celestia will unlock 175.59 million TIA at 10:00 PM Beijing time tonight, worth about $900 million, accounting for 79.91% of the current circulating supply. Even excluding the tokens that have been traded through the OTC market, there will still be 92.3 million TIA, worth about $460 million, flowing into the market, and the current market is already very reluctant to take on these bags.
In this situation, investors have embraced the relatively fair MEME market, although the MEME market currently also has serious PVP phenomena, "conspiracy groups" rampant, and the token life cycle is too short, but for investors, this is also "choosing the tallest among the dwarfs", there is no other choice.
From the data, yesterday the total market cap of MEME coins on Solana was inflated to over $12 billion, a historical high. And according to defillama data, the TVL of the CDP and RWA sectors are $8.048 billion and $7.022 billion respectively, the on-chain funds' interest in MEME coins is surpassing the Altcoins under the VC-led narrative.
Under regulatory pressure, Altcoins are struggling to breathe
Another widely accepted reason for the poor performance of the Altcoin market is the heavy regulatory pressure facing the crypto industry in 2024. The SEC's fines in the crypto field in 2024 are expected to reach $4.68 billion, an increase of 3018% compared to $150.26 million in 2023, and many top crypto companies have been accused by the SEC this year, including Binance, Coinbase, ConsenSys, Uniswap and OpenSea.
Compliance and regulatory pressure has hindered the Altcoin market in terms of trading and promotion, and in many countries and regions, BTC has already gained regulatory recognition, and people can trade BTC legally, but most Altcoins do not have such a regulatory environment and are still struggling to "prove they are not securities and legitimate". Even the stablecoin giant Tether, just when theWall Street Journal disclosed that the US Treasury Department is considering sanctioning Tether, and the government has not yet confirmed, USDT experienced a de-peg in the short term, one can imagine the regulatory pressure the crypto market is under now.
The pressure on regulation is also the main reason why the crypto industry is generally concerned about the US election, ConsenSys even wrote to the future US president in advance, calling for friendly regulation of the crypto industry. If the new president takes a friendly policy stance towards crypto, it may boost the confidence of retail investors and even institutional investors in Altcoins.
Slow progress in Altcoin project innovation
Although the current primary market financing is still relatively prosperous, the pace of innovation in Altcoin projects remains slow, with the narrative stagnant, and the projects have not kept up with the pace of industry and market sentiment development in terms of technological and narrative innovation. Ethereum founder Vitalik is still sorting out the roadmap for Ethereum's future development, while projects within the ecosystem are still building Lego-like narratives around L2, LST, and reStaking, and other ecosystem protocols are also basically built around these narratives.
In the current environment, investors have gradually become desensitized to these projects packaged in narratives, and these projects have already accumulated sufficient bubbles, with less upside space. If there is not enough new technological innovation or narrative innovation to support them, the competitiveness of Altcoins, especially the older ones, will continue to decline.
The previous crypto cycle may have become ineffective
Reviewing the previous bull markets such as 2017 and 2021, the crypto market has shown a cyclical pattern of "Bitcoin rising, then Altcoins rotating." When Bitcoin continues to break through highs with strong growth, it triggers a surge in market sentiment and increased user risk appetite, leading to an Altcoin bull market.
However, in this round, we may no longer be able to engage in such a futile effort. As mentioned earlier, the approval of Bitcoin spot ETFs and the entry of more rational institutional investors, the tightening of regulatory policies, the loss of retail confidence in Altcoins, and the emergence of fair, low-cost, and barrier-free minting of Meme coins and Pepe coins have all made this cycle unique.
The result may be that even if BTC breaks through its previous highs and continues to rise, the Altcoin market situation may not improve, and instead, some new areas such as Meme coins, Pepe coins, and the Bitcoin ecosystem may have opportunities.
Conclusion: Hoping the above analysis is wrong
Of course, the bottom line determines the mindset. Although the Altcoin market is currently performing poorly, it is still hoped that the Altcoin performance will be impressive when BTC is about to break new highs (or even have a reversal). Looking at today's data, BTC's rise has already driven the rebound of some Altcoins. According to Quantify Crypto data, among the top 200 cryptocurrencies by market capitalization today, 130 tokens have rebounded, while 70 tokens are still in a downward trend, with DOGE up 3.68% and SUI up 8.63% today.
But stepping back, in the current market situation, with Bitcoin dancing solo and the market's FOMO sentiment for Altcoins not good, the prices of Altcoins are gradually returning to their true value, and this process of bubble deflation may also be part of the bull market plan.
