Author: Michael Tabone, CoinTelegraph; Compiled by: Tong Deng, Jinse Finance
Bitcoin exchange-traded products may fundamentally change the concept of the Altcoin "season".
For years, the cryptocurrency market has followed a familiar rhythm, a predictable dance of capital rotation.
However, this once-assumed cycle is showing signs of structural collapse.
Spot Bitcoin exchange-traded funds (ETFs) have broken records, attracting $129 billion in capital inflows in 2024. This provides retail and institutional investors unprecedented access to Bitcoin, but also creates a vacuum, sucking capital out of speculative assets. Institutional players now have a safe, regulated way to access cryptocurrencies without the risks of the Altcoin market. Many retail investors also find ETFs more appealing than the dangerous chase for the next 100x token. Even the renowned Bitcoin analyst Plan B has swapped his actual BTC for a spot ETF.
This shift is happening in real-time, and if capital remains locked in structured products, Altcoins will face reduced market liquidity and relevance share.
Has the Altcoin season ended? The rise of structured cryptocurrency investments
Bitcoin ETFs provide an alternative to chasing high-risk, low-market cap assets, as investors can gain leverage, liquidity, and regulatory transparency through structured products. Retail investors, who were once the primary drivers of Altcoin speculation, can now directly access Bitcoin and Ethereum.
Institutional investors have greater incentives to avoid Altcoin risks. Hedge funds and professional trading desks, which once chased the higher returns of less liquid Altcoins, can now deploy leverage through derivatives or invest through traditional financial channels like ETFs.
With the ability to hedge through options and futures, the incentive to bet on illiquid, low-volume Altcoins is greatly diminished. The record $2.4 billion in outflows and ETF redemptions in February, creating arbitrage opportunities, further confirm this, forcing the cryptocurrency market to adopt unprecedented discipline.
The traditional "cycle" starts with Bitcoin and then enters the Altcoin season. Source: Cointelegraph Research
Will venture capital abandon cryptocurrency startups?
Venture capital (VC) firms have historically been the lifeblood of the rotation seasons, injecting liquidity into emerging projects and crafting grand narratives around new tokens.
However, with leverage easily accessible and capital efficiency as the primary task, VC firms are reconsidering their approach.
VC firms seek to maximize their return on investment (ROI), typically in the range of 17% to 25%. In traditional finance, the risk-free capital rate is the benchmark against which all investments are measured, often represented by the US Treasury yield.
In the cryptocurrency realm, Bitcoin's historical growth rate serves as a similar benchmark for expected returns. This effectively becomes the industry's version of the risk-free rate. Over the past decade, Bitcoin's average 10-year compound annual growth rate (CAGR) has been 77%, far exceeding traditional assets like gold (8%) and the S&P 500 (11%). Even over the past five years, through both bull and bear markets, Bitcoin has maintained a 67% CAGR.
Benchmarked against this, venture capitalists investing in Bitcoin or Bitcoin-related businesses at this growth rate would achieve a total investment return of approximately 1,199% in five years, meaning the investment would nearly 12x.
While Bitcoin remains volatile, its long-term superior performance makes it a fundamental benchmark for assessing risk-adjusted returns in the cryptocurrency domain. With arbitrage opportunities and reduced risk, venture capital firms may make safer choices.
In 2024, venture capital deal volume declined by 46%, although total investment amounts rebounded in the fourth quarter. This suggests that investments will shift towards more selective, higher-value projects, rather than speculative financing.
Web3 and AI-driven cryptocurrency startups remain attractive, but the days of indiscriminate financing for every token with a whitepaper may be numbered. If venture capital further shifts towards structured investments through ETFs rather than direct investments in high-risk startups, the consequences for new Altcoin projects could be severe.
Meanwhile, the few Altcoin projects that enter the institutional spotlight, such as Aptos, which recently filed for an ETF, are exceptions rather than the norm. Even crypto index ETFs aimed at capturing broader investment opportunities struggle to attract meaningful capital inflows, highlighting the concentration, not dispersion, of capital.
The problem of oversupply and the new market realities
The landscape has changed. The sheer number of Altcoins competing for attention has created a saturation problem. According to Dune Analytics data, there are currently over 40 million tokens in the market. In 2024, an average of 1.2 million new tokens were issued per month, and over 5 million tokens have been created since the beginning of 2025.
With institutions leaning towards structured exposures and a lack of retail-driven speculative demand, liquidity is not flowing into Altcoins as it once did.
This poses a harsh reality: most Altcoins are unlikely to survive. CryptoQuant CEO Ki Young Ju recently warned that without a fundamental shift in market structure, most of these assets are unlikely to survive. "The era of everything going up is over," Ju said in a recent X post.
In an era where capital is locked in ETFs and perpetual contracts rather than freely flowing into speculative assets, the traditional strategy of waiting for Bitcoin's dominance to weaken before shifting to Altcoins may no longer apply.
The cryptocurrency market has transformed. The easy, cyclical Altcoin rallies may be replaced by an ecosystem where capital efficiency, structured financial products, and regulatory clarity dictate the flow of funds. ETFs are changing the way people invest in Bitcoin and fundamentally altering the distribution of liquidity across the entire market.
For those who have built their assumptions on the premise that Altcoin booms will always follow each Bitcoin rally, now may be the time to reconsider. As the market matures, the rules may have changed.
