Why are altcoins so difficult?

The correlation between the performance of the cryptocurrency market and macro liquidity is quite significant. The reserves of deposit institutions at the Federal Reserve are a core indicator reflecting dollar liquidity, and the movements of the cryptocurrency market are highly correlated with changes in this indicator.

Bitcoin, due to the continuous inflow of ETF funds, is less affected by macro liquidity and has shown strong performance. In contrast, altcoins are greatly influenced by macro liquidity and are very vulnerable.

It can be seen that from February to September this year, this indicator has been fluctuating downward, indicating that macro liquidity has been contracting since February. This is the main reason for the poor performance of altcoins over the past six months.

The turnaround in the altcoin market mainly depends on two points:

1. Improvement in macro liquidity. The reserves of deposit institutions at the Federal Reserve are a lagging indicator, and currently, we can only see the data for September; the latest data for October will take some time to be released. However, on October 28, the U.S. Treasury Department lowered its federal borrowing estimate for this quarter, expecting to borrow $19 billion less, while maintaining a target TGA account balance of $700 billion by the end of the year. The current TGA account balance is $830 billion, which means the Treasury will borrow $19 billion less for the rest of this quarter and spend an additional $130 billion. This will somewhat improve macro liquidity.

2. Outflow of funds from BTC. Historically, after Bitcoin hits a new high, many whales tend to sell, and a significant portion of these funds will flow into the Ethereum and altcoin markets.