Altcoin are mired in a liquidity desert
Altcoin are the part of the cryptocurrency market most reliant on excess liquidity. They tend to perform best when monetary policy is loose, economic activity improves, and cryptocurrency participants are willing to further sell Bitcoin and invest in other cryptocurrencies. Sykodelic believes that this environment has never truly materialized in this cycle.
Related reading: Altcoin season explodes: What happens if Bitcoin's dominance starts to cool down?
The chart shared by Sykodelic displays the OTHERS index, which tracks the total market capitalization of cryptocurrencies outside the top ten, alongside two macroeconomic indicators—the Federal Reserve Net Liquidity Index and the Purchasing Managers' Index (PMI). Interestingly, these three indicators consistently move in tandem.
Source: Chart from Sykodelic on X
For example, in the 2020/2021 cycle, all three moved in the same direction. The Federal Reserve's net liquidity grew rapidly, the Purchasing Managers' Index (PMI) was in expansionary territory, and the market capitalization of other industry indices grew from less than $100 billion to nearly $600 billion.
BitStarz player wins a record-breaking prize of $2,459,124! Will you be the next big winner?
The current cycle presents a starkly different picture. The Federal Reserve's net liquidity indicator has been range-bound for most of the past two years, exhibiting significant volatility and lacking a clear directional trend. Meanwhile, the Purchasing Managers' Index (PMI) has been contracting for most of this period, remaining below 50 for 26 consecutive months before finally returning to expansion in January 2026. Other industry indices faithfully reflect this situation, remaining sideways and failing to exhibit the upward momentum required for Altcoin rallies.
The framework for this alternative season may finally be taking shape.
Once the diagnosis is confirmed, the next step is to explore the possible direction of the Altcoin season. Interestingly, Sykodelic's analysis also focuses on potential changes in the Altcoin market. This analyst believes that a favorable environment for Altcoin expansion is forming.
Experts say there will be no Altcoin season in 2026 for the following reasons.
His charts show that the Federal Reserve's net liquidity has bottomed out and begun to rebound, while the Purchasing Managers' Index (PMI) has returned to contraction territory and entered expansion territory. For example, the ISM Manufacturing PMI for January 2026 is 52.6%, up 4.7 percentage points from 47.9% in December. The PMI for February 2026 falls to 52.4 from 52.6 in January, but is still higher than the market expectation of 51.8.
These two changes combined might provide the context that Altcoin have been missing from their history. As shown in the chart above, the green prediction box to the right of the current price indicates that the market capitalization of other cryptocurrency indices is expected to rebound to around $560 billion.
