However, while Bitcoin's price hits new highs, the altcoin market is in a slump, with many small coins experiencing significant price declines in the short term, and market capital flows clearly favoring Bitcoin. Investors may wonder whether they should continue to chase Bitcoin at this time, or take advantage of the low prices of altcoins to appropriately fill their positions in some promising projects.
Introduction: Bitcoin's bull market and the slump of altcoins, how should investors choose?
Bitcoin continuously refreshes historical highs; as of the time of writing, Bitcoin is quoted at about $99,000, approaching the $100,000 mark, and market sentiment is heating up accordingly. More and more investors predict that Bitcoin will continue to rise in the near future, pointing to higher targets, and some even believe its long-term value will far exceed this price point. However, while Bitcoin's price hits new highs, the altcoin market is in a slump, with many small coins experiencing significant price declines in the short term, and market capital flows clearly favoring Bitcoin.
According to Binance data, among all tokens 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 follow suit, while when Bitcoin pulls back, the declines of altcoins are even more severe. This has led to greater losses for many retail investors whose accounts have been heavily weighted in altcoins, and even in this round of Bitcoin bull market, they not only did not profit but also experienced asset shrinkage.
It is also noteworthy that many investors have chosen to sell off altcoins to acquire Bitcoin at this stage. They believe that Bitcoin may still rise by another 30% in the short term, while altcoins are unlikely to achieve such gains. In this expectation, many are increasing their positions in Bitcoin, even when close to the $97,000 high, still holding high hopes for its subsequent trend.
This phenomenon has triggered a series of questions from investors: Behind Bitcoin's constant rise, should they continue to chase Bitcoin? Or should they take advantage of the low prices of altcoins to appropriately fill positions in some promising projects?
This article will conduct an in-depth analysis from the perspectives of market sentiment, capital flows, historical trends, and investor positioning strategies, exploring the pros and cons of chasing Bitcoin and filling positions in altcoins in the current market environment, helping investors uncover potential investment opportunities and make more rational decisions.
Institutions continue to accumulate, Bitcoin buying spree
As Bitcoin's price skyrockets, the total assets directly invested in Bitcoin by American exchange-traded funds (ETFs) have surpassed $100 billion.
Bloomberg's senior ETF analyst Eric Balchunas pointed out that the overall trading volume of the Bitcoin industry has surpassed $50 billion, equivalent to the average daily trading volume of the entire UK stock market. Notably, the trading volume of MicroStrategy (MSTR) has reached $32 billion, while 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 is also continuously growing, making it a market wonder.
MicroStrategy: The engine behind Bitcoin's bull market
The surge of Bitcoin cannot be separated from the strong support of MicroStrategy. The company initially raised funds through bond issuance to purchase Bitcoin, and the value of each MSTR share essentially represents the amount of Bitcoin held by the company, making it a 'Bitcoin indicator' in the US stock market. However, in recent years, MicroStrategy has adopted a more direct and expansive approach – 'premium issuance'.
In simple terms, when Bitcoin's price rises, the company's market value also increases, and the 'exchange rate' of Bitcoin for MSTR will also yield a premium. At this time, MicroStrategy raises funds by issuing more stocks to purchase more Bitcoin at a premium. Thus, the amount of Bitcoin corresponding to each MSTR share will further increase, driving the continuous rise in the company's market value and stock price. This process is akin to a self-circulating growth engine.
Previously, Marsbit analyzed MicroStrategy when the MSTR stock price was $250. We suggested increasing holdings, and now the MSTR stock price is $473.
'Infinite Money Glitch': The binding of US stocks and Bitcoin
This approach has not only made MicroStrategy stronger but has also propelled the US stock market into a new paradigm shift. MicroStrategy's CEO Michael Saylor has repeatedly stated that his model is what he calls the 'Infinite Money Glitch'.
Initially, many were skeptical of this, but as giants like Microsoft began discussing incorporating Bitcoin into their financial strategies, this idea gradually gained acceptance among more market participants.
If Saylor's prediction comes true, in the future, more US companies will imitate MicroStrategy's model, choosing to make Bitcoin part of their assets through 'premium issuance'. The price of Bitcoin will become more closely tied to the US stock market, resulting in a significant flow of funds, which will almost entirely flow into Bitcoin rather than other cryptocurrencies.
Institutional capital inflows have gradually focused on Bitcoin, while other cryptocurrencies have failed to benefit. For example, the inflow of funds into Bitcoin ETFs continues to break historical records, while the performance of Ethereum ETFs appears lackluster. This phenomenon clearly indicates that Bitcoin has become the preferred target for institutional capital, and other crypto assets have far less appeal compared to Bitcoin.
Market capital flows: Are meme coins also absorbing capital from competing coins?
In this round of the bull market, if there is any sector that can rival Bitcoin's growth, it must be meme coins. From NEIRO to MOONDENG, and then to PNUT, there are daily instances of some 'meme coins' breaking through $50 million in market capitalization, attracting a large amount of capital chasing them. On-chain data shows that there are few signs of large holders and whales increasing their altcoin holdings, while support for meme coins is frequent. Especially within the Solana ecosystem, a large amount of capital flows into meme coins, further squeezing the overall market capitalization and prices of altcoins.
This point can be glimpsed from the position data of mainstream crypto market makers.
According to Arkham data, among the top ten crypto market makers, most of the holdings are concentrated in Bitcoin and meme coins. For example, over 70% of positions for QCP Capital, Flow Traders, and Cumberland are Bitcoin. Large market makers like Wintermute and GSR Markets have more than half of their holdings skewed towards the Solana ecosystem and meme coins.
The attraction of institutional investment to Bitcoin is understandable, but why are meme coins also absorbing a lot of capital from competing coins? Here are several key reasons:
1. The polarization of the industry
With traditional finance (TradFi) making a significant entry into the crypto market through compliant channels like Bitcoin ETFs, more and more capital is being absorbed by Bitcoin. Meanwhile, meme coins, as unique 'speculative tools' in the crypto market, attract a large amount of high-risk preference capital due to their high volatility and extremely short capital return cycles. In contrast, many traditional altcoins struggle to gain market attention due to a lack of innovation and practical application scenarios. In comparison, Bitcoin and meme coins occupy both ends of the market capital spectrum, with one being a 'safe-haven asset' and the other a 'speculative darling'.
2. The trend of capital flow
The current situation of altcoins is fundamentally related to capital flow. Many VC tokens have inherent issues of overvaluation, coupled with the lack of actual product support after their launch, leading to insufficient market confidence. Meme coins have capitalized on this by gaining significant attention through low barriers to entry, high speculation, and community-driven sentiment. Investors can earn substantial returns in the short term through meme coins, and this high volatility makes meme coins particularly eye-catching in the current market with reduced liquidity.
3. The catalyst of culture and sentiment
The true uniqueness of meme coins lies in the fact that they are not just an 'investment tool', but a cultural phenomenon. They embody the emotions and identities of the community and serve as an expression of collective consciousness. Meme coins do not rely on traditional notions of technology or functionality; instead, they create value through narrative and emotion. Investors join the meme coin community not just to make money, but to participate in a carnival fueled by sentiment. This is an attraction that many traditional competing coins lack.
Currently, the combined capital attraction effect of meme coins and Bitcoin has weakened the performance of the altcoin market, as both capital and confidence are being squeezed. In the short term, this trend is difficult to reverse. Most of the liquidity in the market is firmly glued to these two sectors, leaving less and less room for altcoins. This is undoubtedly a severe challenge for altcoin investors, but it may also be an opportunity for positioning for future rebounds.
Looking back at history, what might the future trajectory of altcoins be?
The wheels of history always turn, yet they can always produce something new. Currently, market capital is clearly leaning towards Bitcoin, but this does not mean that the 'bloodsucking effect' will continue indefinitely. In fact, whenever Bitcoin rises consecutively and breaks through important highs, market capital often flows back to the altcoin sector, seeking those value gaps that have yet to be reassessed. This 'Bitcoin leads, altcoins follow' rhythm has been repeatedly played out in the past few bull markets, becoming a major rule of market capital flow.
Using data as a mirror, reviewing the capital inflow phenomenon of altcoins
As crypto researcher @Pompeii2077 pointed out, if we observe the market using Total3 (the total market capitalization excluding BTC, ETH, and mainstream stablecoins), 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 $57,000 on January 8, 2021. However, during this period, the overall market capitalization of altcoins had hardly made any progress. Moreover, during the few days when Bitcoin experienced a brief pullback of 10%, the market capitalization of altcoins directly plummeted by 36%, and for small-cap coins, this pullback was even close to a halving.
However, turning points often sprout from despair. On January 8, 2021, after a significant 27% pullback in Bitcoin, altcoins finally entered a rebound mode. As Bitcoin recovered from its pullback and further rose to a new high of $57,000 on February 21, 2021, the overall market capitalization of altcoins surged by 197%, marking a festive period for altcoin investors.
However, the good times were short-lived. After Bitcoin reached a new high on February 21, it faced a rapid adjustment, falling 27% over a span of 7 days. Naturally, altcoins were not spared, with highs dropping by 39%, severely affecting market confidence. From the end of February to March 26, the overall market capitalization of altcoins entered a range of fluctuations, with investor sentiment in a wait-and-see state.
The real explosion began on March 26, 2021. On this day, Bitcoin pulled off a strong daily rebound, warming up market sentiment and launching a rally in altcoin market capitalization that lasted for a month and a half. By May 12, the overall market capitalization of altcoins had increased by 119% from the high point at the end of February, reaching a new high.
Why did May 12 become the peak of altcoin market capitalization? Two macro events are worth noting:
Shiba token's listing on Binance marks the peak of Meme culture;
The US April CPI data exploded, reaching a new high since the pandemic, triggering a short-term surge in US bond yields and the US dollar index.
These factors collectively stimulated market sentiment, but subsequent adjustments are also inevitable.
Bull market patterns: The rhythm of altcoins resonates with Bitcoin
Through retrospective analysis, it can be seen that whenever Bitcoin reaches a temporary peak, the altcoin market inevitably suffers from 'bloodsucking', and even experiences greater declines during pullbacks. However, Bitcoin's adjustments are often the starting point for altcoin rebounds. This rhythm was repeatedly played out in the last bull market, providing important reference significance for the current market.
The potential of altcoins: Opportunities in the slump, which sectors and mainstream coins are worth positioning?
Currently, many altcoins are at low prices, and history shows that this is often a golden window for positioning in potential projects. Especially those with technological innovation, ecological support, and long-term growth logic are more likely to stand out in future capital inflows. Emerging fields such as RWA, Bitcoin ecology, DePin, and AI are becoming the focus of investors, bringing new possibilities for future market growth.
DeFi: The new force reshaping traditional finance
Decentralized finance (DeFi) remains an important sector in the crypto market, with its core lying in reconstructing traditional financial services through blockchain technology, including lending, trading, and asset management.
Aave (AAVE) and Uniswap (UNI): Aave, as a leading decentralized lending protocol, brings new possibilities to the DeFi market with its innovative flash loan feature. Uniswap, as a benchmark for decentralized exchanges, simplifies the trading process of crypto assets through an automated market maker (AMM) mechanism. With AAVE protocol upgrades and the advancement of UNI Chain, these two major projects are expected to continue attracting more users and capital in the future.
Chainlink (LINK): As a leader in 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.
Bitcoin ecology: The key to expanding network functionality
Bitcoin is not only digital gold, but its ecological development is gradually becoming a new hotspot of market attention. Supported by smart contracts, NFTs, and decentralized applications, the functionality and application scenarios of Bitcoin are being redefined.
Stacks (STX): As the representative of smart contracts in the Bitcoin ecosystem, Stacks adds more scalability by building decentralized applications (dApps) on Bitcoin, attracting more and more developer attention.
Ordinals and BRC-20: The NFT and token standards of the Bitcoin ecosystem are gradually emerging, and these innovations empower Bitcoin with more use cases, also boosting the overall activity of the Bitcoin network.
DePin (Decentralized Physical Infrastructure Networks): Empowering the real-world economy
DePin (Decentralized Physical Infrastructure Networks) provides decentralized management and incentive models for the Internet of Things, energy, and the sharing economy through blockchain technology, becoming an important sector that combines technology and practical economic applications.
Helium (HNT): Helium is dedicated to establishing a global decentralized wireless IoT network. Its unique incentive mechanism attracts a large number of nodes to participate, forming a stable infrastructure network. In the future, as IoT demand grows, Helium is expected to occupy an important position in the DePin sector.
IO.NET (IO): As an emerging force in the DePin sector, IO.NET constructs decentralized communication infrastructure, providing innovative solutions for IoT and internet communications, and is expected to occupy an important position in the DePin ecosystem in the future.
RWA (Real World Assets): Linking on-chain and off-chain assets
The RWA (Real World Assets) sector aims to bring traditional financial assets (such as real estate, bonds, and stocks) onto the blockchain through blockchain technology, thereby achieving integration between traditional assets and crypto assets. The potential in this field lies in the fact that on-chain asset management can significantly enhance the efficiency and transparency of traditional finance.
MANTRA (OM): MANTRA aims to provide investors with a more diversified selection of assets through DeFi tools and RWA support, rapidly rising in the RWA sector.
Pendle (PENDLE): The innovation of Pendle lies in tokenizing time value, allowing investors to freely trade future yield assets, injecting more flexibility and liquidity into the RWA market.
AI and blockchain: The 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 markets. The integration of the two not only injects new vitality into the crypto market but also creates entirely new technological application scenarios.
TAO (TAO): TAO focuses on the decentralized AI market, constructing an open platform for AI development and sharing, providing seamless collaboration and incentive mechanisms for developers, thus promoting innovation in the AI ecosystem.
Worldcoin (WLD): WLD aims to achieve global decentralized identity verification through biometric technology, providing a new direction for the integration of AI and blockchain, particularly having a profound impact in the fields of data privacy and identity verification.
Conclusion: Bitcoin dances alone, while opportunities for altcoins are brewing
The current market's differentiation pattern is clear: Bitcoin, as the 'king of crypto', leads the way under the push of institutional capital and market sentiment, while altcoins are in a slump. However, this tilt in capital flow will not last forever. Historically, Bitcoin's phase adjustments in a bull market often signal the upcoming rebound cycle for altcoins.
For investors, the rise of Bitcoin is certainly exciting, but its profit potential is gradually being priced in by the market. Behind the low prices of altcoins lie those value projects that have yet to be reassessed. Once capital begins to flow back into these potential sectors, the explosion of altcoins may far exceed expectations.
More noteworthy is that with the rise of the Trump administration, market expectations for policies regarding the crypto industry have also quickly heated up. The Trump team has always been known for promoting economic growth and attracting investment, and their attitude towards the crypto market is even friendlier. If more favorable policies are introduced in the future, such as tax reductions for crypto, incentives for corporate blockchain applications, and a more relaxed regulatory framework, this will inject new growth momentum into the Bitcoin and altcoin markets, and may even trigger a broader capital inflow, driving the prosperity of the entire crypto market.
Planning for the future, it might be wise to wait for the right opportunity. When Bitcoin's rally takes a breather, the market's focus may shift to those competitive coins with technological innovation and practical application prospects. Emerging sectors such as RWA, DePin, and AI are nurturing the next round of growth momentum, and many quality projects are currently in the 'discount zone'. With potential boosts from favorable policies, the low tide in the altcoin market may be the best window for positioning.
The story of Bitcoin's dominance continues, but under the policy catalyst of the Trump administration, the chapter of competing coins may welcome a more exciting beginning.
