As Bitcoin enters a phase of fluctuation following a series of historical highs, market focus is gradually shifting to altcoins. This is not only a natural choice of fund flow but also a precise capture of opportunities by investors. Various signs indicate that the current altcoin market is just beginning, and its potential has not yet been fully released, with expectations for even stronger performance ahead.
The 'rotation effect' in Bitcoin's fluctuations
Bitcoin has recently reached a profit divergence point, with long-term investors beginning to realize some profits, while institutional funds continue to significantly increase their holdings. Data shows that since September, the proportion of investors who have held coins for 6 months to 1 year and are selling has reached 35%. Compared to the previous wave of sell-offs from investors holding coins for 1 to 3 years, the scale and impact of this round of adjustment have significantly weakened. This suggests that, although Bitcoin may fluctuate between $88,000 and $105,000 over the next six weeks, the adjustments will be milder and may even constitute a healthy consolidation in a bull market.
Meanwhile, market funds are gradually flowing into altcoins, driving the rapid increase in both the market cap and trading volume of altcoins. Data shows that the market share of altcoins increased from 8.91% to 11.0% within a week, while the daily trading volume share rose from 23% to 37%. This indicates that Bitcoin's adjustment has not dampened market enthusiasm; instead, it has triggered a flow of funds into more resilient assets, initiating the rise of altcoins.
Why has the altcoin market just begun?
Since August, the median increase of altcoins within the top 100 by market cap has reached 106%, but this increase primarily reflects the general correction during the market's low-price phase. Although some coins have doubled, the vast majority of altcoins are still valued below the historical 80th percentile, and their prices are below the historical 90th percentile, indicating significant growth potential. Furthermore, the current market's 'spike sprint' style surge indicates a strong willingness to buy, but there is insufficient liquidity to sell, suggesting that prices still have more upward potential.
From the perspective of leading coins, the frontrunners in this market cycle are large-cap coins like XRP, DOGE, and ADA, rather than the small-cap new coins of the past. This trend reflects the placement logic of market funds: leading the rise with established coins, enhancing the overall market valuation level, and igniting investor sentiment. This pattern was observed during the significant bull market of 2020-2021, serving as a notable signal for subsequent trends.
However, it is worth noting that the growth potential of large-cap coins is limited, and their price increases are more about creating market conditions to lay the groundwork for subsequent trends. The projects that truly stand out in every bull market are often those emerging projects closely related to growth narratives.
Newly issued altcoins will become a breakthrough point for funds
The market's aversion to high FDV new coins makes the newly issued altcoins from 2020-2021 more attractive. Their main advantages lie in the following two points:
Baptism of a complete bear market cycle:
These cryptocurrencies have experienced a complete bear market cycle, and their valuations have been significantly deflated. Currently, most cryptocurrencies have a circulation rate exceeding 80%, and the majority of VC shares have been unlocked, resulting in a relatively clean market that is less prone to sudden sell-off risks.
Capital sedimentation effect:
Every round of large-scale capital investment usually brings about the sedimentation of high-quality projects. Taking the internet industry as an example, after the bubble burst in 2000, about 12% of companies successfully transformed. Similarly, 2020-2021 was a peak investment period for the crypto market, but currently, only a few projects (like SOL) have completed their transformation. As the market gradually enters the second bull market, these newly issued projects are expected to leverage technological improvements and narrative advantages to gain a first-mover advantage.
Future path of the altcoin market
According to historical patterns, the first phase of the altcoin market's activation typically exhibits 'indiscriminate buying,' eliminating the low-price phase. As the market gradually differentiates, fundamentally strong projects will encounter 'air refueling' in the second phase. This phase not only tests the capital allocation ability but also the investors' coin selection insight.
In terms of asset selection, investors can prioritize allocating to 'old kings' and DeFi leaders as relatively stable foundational positions. Additionally, focusing on emerging projects that have undergone sufficient baptism in bear markets, have clean circulation, and possess growth narratives can lead to higher valuation premiums in the long term.
The altcoin market has just begun, with the market shifting from indiscriminate surges to a more structured trend, demonstrating stronger sustainability and depth potential. During Bitcoin's phase of fluctuation, altcoins not only took over the upward baton but also provided investors with abundant opportunities. Looking ahead, the altcoin market is expected to maintain its strength and become a dazzling protagonist in the next bull market.