CryptoQuant CEO Ki Young Ju weighed in on the reasons for the altcoin season being delayed in the current market conditions. According to Ju, the recent rally in Bitcoin, unlike previous cycles, is largely driven by institutional investors and spot ETF demand.
In past cycles, retail investors on crypto exchanges would channel their Bitcoin earnings into altcoins, kicking off the altcoin season. However, this time around, institutional investors and ETF buyers have no intention of investing their Bitcoin earnings into altcoins. Institutions generally prefer to hold their portfolios in Bitcoin and mostly operate outside of crypto exchanges. This significantly hinders capital flows into altcoins.
Liquidity shortage in the altcoin market
The fact that the altcoin market remains below its previous all-time high indicates that new user entries on exchanges are decreasing and that altcoins are lacking liquidity. In order for altcoins to reach new highs, a significant amount of new capital needs to flow into crypto exchanges. However, Bitcoin’s rise is currently being supported more by ETFs, institutional investors, and even governments rather than retail investors, which is preventing capital flows into altcoins.
Recommendations for altcoins
Ju notes that altcoin projects need to develop their own strategies without relying on Bitcoin’s momentum. Offering unique use cases to attract new capital and regaining the interest of individual investors are critical factors for altcoins’ success.
In addition, if retail demand for Bitcoin increases again, it is possible that user activity on exchanges will increase and thus trigger an altcoin season. However, under current market conditions, fresh liquidity needs to be infused into the ecosystem for altcoins to start a new cycle.