A phone screen with a graphical chart showing an upward trend labeled “$100,000.” (Photo by … [+]
Bitcoin halving, all-time high and altcoin season – the recipe for a bull run, or is it? First, Bitcoin halving reduces its issuance rate, causing a supply shortage. Afterwards, BTC rallies to its highs and is followed by a horde of pumped-up altcoins driven by investors who prefer higher, albeit riskier, returns. Then the altcoin season is in full swing. Bitcoin experienced its last halving in May of this year and broke $100,000 shortly thereafter – a historic milestone. Still, the altcoin market is bleeding. Where is the usual rally? Is the golden recipe broken? The rise in institutional capital and liquidity shortages due to high interest rates, coupled with Trump’s positive but bold stance on cryptocurrencies, have made one thing certain: this cycle will be unlike anything we have seen before.
How is this cycle different?
Each cycle consists of four phases: accumulation, premium, distribution and discount. Even though the mechanism behind these phases is well known, timing the market is one of the most sought-after skills. You try to predict when we will enter a certain phase in order to develop a strategy for your trades. But even if the cycles follow a predictable pattern, we must not forget the broader market context – and crypto has seen a lot in the past year.
Institutional capital
The growing presence of institutional investors in the Bitcoin market has changed its dynamics. After taking the 7th position as the world’s largest asset, Bitcoin has become a new asset of choice for institutions, supported by the emergence and growth of crypto ETFs. Their increased exposure often brings greater price stability. However, this may not be good news for altcoins. Eventually, fluctuations and large corrections redirect capital flow into altcoins. Less volatility means less returns that could return to the altcoin market.
This year was special. The introduction of Bitcoin spot ETFs has led to a significant inflow of capital from traditional finance into the crypto market. Institutional inflows into these ETFs have triggered a supply shock in Bitcoin and strengthened its dominance. The demand for Bitcoin caused by ETFs has a direct impact on Bitcoin dominance, which currently stands at around 56%, a powerful metric that is often overlooked by inexperienced traders. It measures BTC market share compared to altcoins and provides insights into whether we are in a Bitcoin season (BTC outperforms) or an altcoin season (altcoins outperform). What does strong BTC dominance mean with a stable Bitcoin price? Altcoins dumping. And in this cycle, Bitcoin spot ETFs extended Bitcoin’s dominance. This new variable has been missing from previous bull runs and will undoubtedly make the 2025 altcoin season unique.
Bitcoin: The Cycle of Dominance
Macros: Liquidity and Regulations
If you ask any financial manager what the most important financial metric is, they will tell you that it is liquidity. In 2023 and 2024, US interest rates rose to one of their highest levels in a long time. Even though it has fallen from 5.25% a year ago to 4.19% now, it is still a relatively attractive return for a risk-free asset. On the other hand, interest rate cuts often lead to crypto bull runs for a very simple reason: they create a favorable environment for riskier assets to thrive. After all, a risk-free government bond with a yield of 0.11% as in 2021 is just as attractive as a capital loss due to inflation. Low interest rates mean cheaper borrowing and increased liquidity, which in turn forces investors to park their money for higher returns. Where? Yes, you guessed it. Crypto.
The Trump administration’s victory in the US has undoubtedly shaken the crypto world. The Bitcoin law sparked a lively debate in crypto and non-crypto circles. If passed, the Senate bill would require the Treasury Department and Federal Reserve to purchase 200,000 bitcoins annually over five years to accumulate one million bitcoins. In other words – about 5% of global supply. Needless to say, pro-crypto regulations are a very significant step for the widespread adoption of crypto assets, and Trump’s stance has proven to ignite positive sentiment with BTC hitting its ATH shortly after the future president announced his plans to Creation of a BTC state had confirmed reserve.
Given BTC’s dominance, high interest rates, and crypto-friendly regulations in the US, should we expect a full-blown altcoin supercycle in 2025? This is a billion dollar question.
“Wen altszn”
If history has taught us anything, it is that altcoin pumps often follow large Bitcoin moves. However, it is impossible to estimate how large these price moves will be – or exactly how long it will take altcoins to disappear after Bitcoin’s new all-time highs. David Siemer, CEO of Wave Digital Assets, says: “I don’t think we will see an altcoin season as dramatic as 2021 in the near future, meaning BTC dominance will fall below 40%.” But we will “We will see a huge rise in altcoin values as BTC continues to rise.” Siemer then adds that “for altcoins to break out like 2021 compared to BTC, usage (adoption) and “The value (revenue capture) of altcoins will have to increase by many orders of magnitude,” emphasizing that this could happen in at least three years. But once it begins, the altcoin season itself is easy to identify with some pretty bullish signals:
- Rapid price growth with better performance of altcoins…
