When altcoins outperform Bitcoin and prices surge across the board, it’s called the altcoin season. This is a period of booming growth driven by optimism, just like a rising tide lifts all boats. The altcoin season has driven the development of almost all sectors, and the massive influx of liquidity into the market is its driving force.

Liquidity Tracking

Historically, liquidity has come primarily from two sources:

Retail funds flowing in through centralized exchanges (CEX)

Outflows from Bitcoin on CEX to Altcoins on CEX

The path to the 2021 “copycat season” was clear, but now it has disappeared. The reasons are multifaceted and are the result of the combined effect of several factors.

Project Saturation

Although the market liquidity is abundant, the projects are extremely saturated. Imagine that there are more ships in the sea than waves.

Only certain areas, such as the AI ​​field or the SOL ecosystem, will feel the real wave of the "copycat season". What used to be a "rising tide lifts all boats" has evolved into a selective rotation game, similar to the PvP nature of the "Hunger Games" movie (items roll each other).

Token Dilution: The Invisible Handbrake

Token dilution (especially from token unlocks) kills alt-seasons like 2021. This often overlooked factor sucks up a lot of liquidity. No matter how good a project’s technology is, it’s hard for prices to rise if there’s oversupply.

For tokens launched so far in 2024, the average circulation rate (circulation/supply) of these project tokens is about 14%, and there are about $70 billion worth of tokens waiting to be unlocked.

What happens when oversaturation of projects is combined with an oversupply of tokens? The alt-season is unsustainable.

Increased adoption is a double-edged sword

The increased adoption rate in traditional fields is both a good thing and a bad thing. On the one hand, it enhances the credibility of cryptocurrencies; on the other hand, it also makes the field more sensitive. If more smart people turn to cryptocurrencies, it will be more difficult to find industry opportunities.

Bitcoin ETF: New Developments

The approval of the Bitcoin spot ETF has changed the landscape of altcoins. Before the advent of ETFs, the main access channel for Bitcoin was through CEX. This is a good thing for altcoins, as investors can easily switch from Bitcoin to try altcoins.

This time, the buyers are different. For those who bought Bitcoin through ETFs, the path to the altcoin market was not as direct.

Influence of external environment

Why has 2021 been so unusual for altcoins? A lot of it has to do with the unique circumstances. During the pandemic lockdown, both capital flows and screen time were extremely high, creating the perfect conditions for cryptocurrencies to attract retail investors.

Given the rarity of this situation, it’s reasonable to consider 2021 an outlier. Everyone is still immersed in the high tide of 2021, but the grandeur is gone.

Reasons for the "disappearance" of the copycat season:

The altcoin market has shifted from a rapid rise to a rotation game

As market intelligence continues to improve, finding opportunities requires more effort

Project saturation, coupled with oversupply, is draining liquidity

Traditional altcoin season path broken due to Bitcoin ETF

So how should retail investors respond in the current market environment?

1. Pay close attention to the fully diluted valuation (FDV) and saturation rate.

2. Keep an eye on ETF developments and areas with heavy institutional participation, such as RWAs. These may have different tracks and even more favorable dynamics over the next few years.

3. In a market flooded with altcoins, don’t just look at the dollar value of the project. Comparing altcoin valuations with Bitcoin valuations can more accurately assess altcoin strength.

4. Work harder, do more research, and gain an edge. This is not just about increasing assets, but also about improving knowledge, skills, and connections.

There are still a lot of opportunities in the crypto market, but it requires more efforts and a new perspective. If you just want to wait for it to happen, you will be eliminated sooner or later in the next market. The situation is changing rapidly, and those who can adapt quickly are more likely to succeed.

Later, I will bring you analysis of leading projects in other tracks. If you are interested, you can click to follow. I will also organize some cutting-edge consulting and project reviews from time to time. Welcome all like-minded people in the cryptocurrency circle to explore together.