Written by: Alvis
Introduction: Bitcoin’s bull market and altcoins’ downturn, how do investors choose?
Bitcoin has hit new all-time highs. As of press time, the price of Bitcoin is $97,600, approaching the $100,000 mark, and market sentiment has heated up. More and more investors predict that Bitcoin will continue to rise in the coming period, aiming for higher targets, and some even believe that its long-term value will far exceed this price. However, while the price of Bitcoin has hit a new high, the altcoin market has fallen into a slump. The prices of many small currencies have shrunk significantly in the short term, and market capital flows have clearly tended to Bitcoin.
According to Binance data, among all the tokens currently listed on Binance, the number of tokens that have risen is 285, while the number of tokens that have fallen is as high as 976. Many investors complain that when Bitcoin rises, altcoins fail to rise synchronously, and when Bitcoin falls back, altcoins fall more sharply. This has caused many retail investors' accounts to suffer greater losses due to heavy positions in altcoins, and even in this round of Bitcoin bull market, instead of making profits, they have experienced asset shrinkage.
What is more noteworthy is that many investors even choose to sell altcoins in exchange for Bitcoin at the current stage. They believe that Bitcoin may rise another 30% in the short term, while altcoins are unlikely to achieve such a rise. Under this expectation, many people increase their Bitcoin holdings, and even when it is close to the high of $97,000, they still have high expectations for its subsequent trend.
This phenomenon has raised a series of questions among investors: Should investors continue to chase the rise of Bitcoin as it continues to rise? Or should they take advantage of the low prices of altcoins to cover their positions in some potential projects?
This article will conduct an in-depth analysis from the perspectives of market sentiment, capital flow, historical trends, and investor holding strategies, and explore the pros and cons of chasing the rise of Bitcoin and covering positions in altcoins in the current market environment, to help investors explore potential investment opportunities and make more rational decisions.
Institutions continue to increase their holdings, buying Bitcoin
Bitcoin industry's overall transaction volume has exceeded $50 billion
As the price of Bitcoin has soared, the total value of assets directly invested in Bitcoin in U.S. exchange-traded funds (ETFs) has exceeded the $100 billion mark.
Eric Balchunas, a senior ETF analyst at Bloomberg, pointed out that the overall trading volume of the Bitcoin industry has exceeded $50 billion, which is equivalent to the average daily trading volume of the entire British stock market. It is particularly noteworthy that the trading volume of MicroStrategy (MSTR) has reached $32 billion, and the combined trading volume of MSTU and MSTX is also $6 billion. This data not only exceeds the trading volume of spot Bitcoin ETFs, but also continues to grow, which can be called a market spectacle.
MicroStrategy: The engine behind the Bitcoin bull run
The rise of Bitcoin is inseparable from the strong support of MicroStrategy. The company raised funds to buy Bitcoin by issuing bonds in the early days. The value of each MSTR share actually represents the number of Bitcoins held by the company, which makes it a "Bitcoin indicator" in the U.S. stock market. However, in recent years, MicroStrategy has adopted a more direct and expansive approach - "premium additional issuance".
Simply put, when the price of Bitcoin rises, the company's market value rises accordingly, and MSTR's Bitcoin "exchange rate" will also generate a premium. At this time, MicroStrategy raises funds by issuing additional shares to buy more Bitcoin at a premium. In this way, the number of Bitcoins corresponding to each share of MSTR will increase further, thereby driving the company's market value and stock price to continue to rise. This process is like a self-circulating growth engine.
Marsbit has previously analyzed MicroStrategy. At that time, the share price of MSTR was US$250. Our strategy was to increase holdings. The current share price of MSTR is US$473.
Recommended reading: "No production, only hoarding coins": MSTR's latest financial report released, revealing MicroStrategy's capital thickening and high premium valuation model
“Infinite Funding Crack”: The Binding of U.S. Stocks and Bitcoin
This approach not only makes MicroStrategy more and more powerful, but also pushes the U.S. stock market into a new paradigm shift (Paradigm Shift). MicroStrategy CEO Michael Saylor has repeatedly stated that his model is the so-called "Infinite Money Glitch".
At first, many people were not optimistic about this, but as US stock giants such as Microsoft began to discuss incorporating Bitcoin into financial strategies, this concept was gradually accepted by more market participants.
If Saylor's prediction comes true, more U.S. stock companies will follow MicroStrategy's model in the future and choose to use Bitcoin as part of their company assets through "premium issuance". The price of Bitcoin will become more closely tied to the U.S. stock market, bringing in huge amounts of capital, and these funds will almost entirely flow into Bitcoin rather than other cryptocurrencies.
The inflow of institutional funds has gradually concentrated on Bitcoin, while other cryptocurrencies have failed to benefit from it. For example, the inflow of funds into Bitcoin ETFs continues to break historical records, while the performance of Ethereum ETFs is lackluster. This phenomenon clearly shows that Bitcoin has become the preferred target of institutional funds, and other crypto assets on the market are far less attractive than Bitcoin.
Market capital flow: Are Meme coins also sucking blood from altcoins?
In this round of bull market, if there is any track that can match the growth of Bitcoin, it must be meme coins. From NEIRO to MOONDENG, and then to PNUT, every day there are some "magic disks" that break through the market value of 50 million US dollars from 0, attracting a large number of funds to chase. On-chain data shows that there are few signs of large investors and whales increasing their holdings of altcoins, while support for meme coins is common. Especially in the Solana ecosystem, a large amount of funds have flowed into meme coins, which has further squeezed the overall market value and price of altcoins.
This can be seen from the position data of mainstream crypto market makers.
According to Arkham data, most of the top 10 cryptocurrency market makers hold positions in Bitcoin and meme coins. For example, more than 70% of the positions of QCP Capital, Flow Traders, and Cumberland are in Bitcoin. Large market makers such as Wintermute and GSR Markets hold more than half of their positions in the Solana ecosystem and meme coins.
It is understandable that Bitcoin attracts institutional investment, but why are meme coins also sucking a lot of money from altcoins? Here are some key reasons:
1. Polarization of the industry
As traditional finance (TradFi) enters the crypto market in a big way through compliant channels such as Bitcoin ETF, more and more funds are absorbed by Bitcoin. At the same time, meme coins, as a unique "speculative tool" in the crypto market, have attracted a large amount of high-risk preference funds with their high volatility and extremely short capital return cycle. In contrast, many traditional altcoins have difficulty gaining market attention due to the lack of innovation and practical application scenarios. In contrast, Bitcoin and meme coins are "safe-haven assets" on one side and "speculative darlings" on the other, and both firmly occupy both ends of market funds.
2. Trends in capital flows
The current situation of altcoins is ultimately closely related to the flow of funds. Many VC tokens have inherent problems of high valuations, and many projects lack actual product support after opening, resulting in insufficient market confidence in them. Memecoin just took advantage of this and gained a lot of attention through low-threshold issuance, high speculation and community-driven sentiment. Investors can earn huge returns through memecoin in the short term, and this high volatility makes memecoin particularly dazzling in the current market with reduced funds.
3. Culture and Emotions as Catalysts
The real uniqueness of meme coins is that they are not just an "investment tool", but also a cultural phenomenon. They carry the emotions and identity of the community and are an expression of collective consciousness. Meme coins do not rely on technology or functions in the traditional sense, but form value through narrative and emotional drive. Investors join the meme coin community not only to make money, but also to participate in a carnival fueled by emotions. This is an attraction that many traditional altcoins do not have.
Currently, the combined effect of meme coins and Bitcoin attracting money has caused the altcoin market to perform weakly, squeezing both funds and confidence. In the short term, this trend is difficult to reverse. Most of the liquidity in the market is firmly absorbed in these two areas, leaving more and more room for altcoins. For altcoin investors, this is undoubtedly a severe challenge, but it may also be an opportunity to plan for a future rebound.
Looking back at history, what might be the future trend of altcoins?
The wheel of history always repeats itself, but it can always be innovative. The current market funds are obviously leaning towards Bitcoin, but this does not mean that the "blood-sucking effect" will continue indefinitely. In fact, every time Bitcoin continues to rise and breaks through important highs, market funds tend to flow back to the field of altcoins, looking for those value depressions that have not yet been revalued. This rhythm of "Bitcoin first, altcoins later" has been repeated in the past few rounds of bull markets and has become a major rule of market capital flow.
Using data as a mirror, reviewing the phenomenon of capital repatriation of altcoins
As crypto researcher @Pompeii2077 pointed out, if we use Total3 (the total market value excluding BTC, ETH and mainstream stablecoins) to observe the market, we will find that this pattern was particularly evident in the last bull market.
On December 16, 2020, Bitcoin successfully broke through its previous high and began a strong rally, doubling in just three weeks to January 8, 2021. However, during this period, the overall market value of altcoins barely improved. What’s worse, within a few days when Bitcoin briefly pulled back by 10%, the market value of altcoins plummeted by 36%. For small-cap coins, this pullback was even close to halving.
However, opportunities always sprout in despair. On January 8, 2021, after Bitcoin experienced a sharp correction of 27%, altcoins finally started to rebound. During the period when Bitcoin recovered from the correction and further rose to a new high of $57,000 on February 21, 2021, the overall market value of altcoins soared by 197%, and this period became a carnival for altcoin investors.
However, the good times did not last long. After hitting a new high on February 21, Bitcoin experienced a rapid adjustment, falling 27% in 7 days. Altcoins were not immune, falling 39% from their highs, and market confidence was hit hard. From the end of February to March 26, the overall market value of altcoins entered a volatile range, and investor sentiment was in a wait-and-see state.
The real outbreak began on March 26, 2021. On that day, Bitcoin pulled out a strong daily rebound, driving the market sentiment to warm up, and the market value of altcoins started a wave of charge lasting one and a half months. By May 12, the overall market value of altcoins had further increased by 119% from the high at the end of February, reaching a new high.
Why did May 12 become the peak of the altcoin market value? Two major macro events are worth noting:
Shiba tokens are listed on Binance, marking the peak of Meme culture;
The U.S. CPI data for April exploded, hitting a post-epidemic high, triggering a short-term surge in U.S. Treasury yields and the U.S. dollar index.
These factors together stimulated market sentiment, but subsequent adjustments were inevitable.
Bull market rules: the rhythm of altcoins and Bitcoin resonates
Through review, we can see that whenever Bitcoin reaches a stage top, the altcoin market is hard to avoid being "sucked", and even falls more sharply during the correction. However, Bitcoin's adjustment is often the starting point for the altcoin rebound. This rhythm has been repeated in the last round of bull market, providing important reference significance for the current market.
The potential of altcoins: opportunities in the downturn, which tracks and mainstream currencies are worth investing in?
The prices of many altcoins are currently low, and history shows that this is often a golden window for the layout of potential projects. In particular, projects with technological innovation, ecological support, and long-term growth logic are more likely to stand out in future capital returns. On the basis of classic tracks such as DeFi, emerging fields such as RWA, Bitcoin ecology, DePin and AI are becoming the focus of investors, bringing new possibilities for future market growth.
DeFi: A new force reshaping traditional finance
Decentralized finance (DeFi) remains an important track in the crypto market. Its core lies in reconstructing traditional financial services, including lending, trading, and asset management, through blockchain technology.
Aave (AAVE) and Uniswap (UNI): As a leading decentralized lending protocol, Aave's innovative flash loan function has brought new possibilities to the DeFi market. Uniswap, as a benchmark for decentralized exchanges, simplifies the trading process of crypto assets through the automated market maker (AMM) mechanism. With the upgrade of the AAVE protocol and the advancement of UNI Chain, these two projects are expected to continue to attract more users and funds in the future.
Chainlink (LINK): As the leader of decentralized oracles, Chainlink plays the role of a data connector in the DeFi ecosystem. With the integration of traditional financial institutions and blockchain projects, Chainlink's application scenarios will continue to expand, and its market potential will also increase accordingly.
Bitcoin Ecosystem: The Key to Expanding Network Functionality
Bitcoin is not only digital gold, its ecological development is also gradually becoming a new hot spot in the market. With the support of smart contracts, NFT and decentralized applications, the functions and application scenarios of Bitcoin are being redefined.
Stacks (STX): As a representative of smart contracts in the Bitcoin ecosystem, Stacks injects more scalability into Bitcoin by building decentralized applications (dApps) on Bitcoin, and is attracting more and more developers' attention.
Ordinals and BRC-20: NFT and token standards in the Bitcoin ecosystem are gradually emerging. These innovations have enabled more use cases for Bitcoin and also boosted the activity of the entire Bitcoin network.
DePin (Decentralized Internet of Things): Empowering the Real World Economy
DePin (Decentralized Physical Infrastructure Networks) uses blockchain technology to provide decentralized management and incentive models for fields such as the Internet of Things, energy, and sharing economy, becoming an important track for the combination of technology and practical economic applications.
Helium (HNT): Helium is committed to building a global decentralized wireless IoT network. Its unique incentive mechanism has attracted a large number of nodes to participate and formed a stable infrastructure network. In the future, as the demand for IoT grows, Helium is expected to occupy an important position in the DePin track.
IO.NET: As an emerging force in the DePin track, IO.NET provides innovative solutions for the Internet of Things and network communications by building a decentralized communication infrastructure, and is expected to occupy an important position in the DePin ecosystem in the future.
RWA (Real World Assets): Connecting on-chain and off-chain assets
The RWA (Real World Assets) track is committed to putting traditional financial assets (such as real estate, bonds, stocks) on the chain through blockchain technology, thereby achieving the integration of traditional assets and crypto assets. The potential of this field lies in the fact that on-chain asset management can significantly improve the efficiency and transparency of traditional finance.
MANTRA (OM): MANTRA is committed to providing investors with more diversified asset choices through DeFi tools and RWA support, and is rapidly rising in the RWA track.
Pendle (PENDLE): Pendle's innovation lies in tokenizing time value, allowing investors to freely trade future income assets, injecting more flexibility and liquidity into the RWA market.
AI and blockchain: deep integration of future technologies
The combination of artificial intelligence (AI) and blockchain technology is providing new ideas for data management, smart contract optimization and decentralized AI market. The integration of the two not only injects new vitality into the crypto market, but also creates a new technology application scenario.
TAO (TAO): TAO focuses on the decentralized AI market. By building an open AI development and sharing platform, it provides developers with seamless collaboration and incentive mechanisms, thereby promoting innovation in the AI ecosystem.
Worldcoin (WLD): WLD aims to achieve global decentralized identity authentication through biometric technology, providing a new direction for the integration of AI and blockchain, especially in the fields of data privacy and identity authentication.
Conclusion: Bitcoin is dancing alone, opportunities for altcoins are brewing
The current market differentiation pattern is clear: Bitcoin, as the "king of cryptocurrencies", is leading the way driven by institutional funds and market sentiment, while altcoins are in a slump. However, this tilt in the flow of funds will not last forever. From historical experience, Bitcoin's periodic pullback in the bull market often indicates that the rebound cycle of altcoins is about to come.
For investors, the rise of Bitcoin is certainly exciting, but its profit potential is gradually being factored in by the market. Behind the low prices of altcoins, there are valuable projects that have not yet been revalued. Once funds begin to flow back to these potential tracks, the outbreak of altcoins may far exceed expectations.
Planning for the future, why not wait for the right opportunity? When the rise of Bitcoin takes a breather, the market's attention may turn to those altcoins with technological innovation and practical application prospects. Emerging tracks such as RWA, DePin, and AI are nurturing the next round of growth momentum, and many high-quality projects are in the "discount range" at the moment. For those investors who are willing to take risks and seek high returns, it may be time to re-examine the investment value of altcoins.
The story of Bitcoin's dominance is continuing, but the chapter of altcoins may have just begun.
