In this video: why so many people thought alt season would happen this market cycle, and what they ultimately missed. Video by Benjamin Cowen.
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Many people anticipated an altcoin season this market cycle primarily due to historical patterns, expectations of capital rotation from Bitcoin (BTC), and new narratives in the crypto space. The current cycle, however, has been different, with factors like changing macroeconomic conditions and fragmented liquidity delaying or preventing a broad altcoin rally.
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Key Drivers of the Expectation
Historical Precedent: In past bull markets (e.g., late 2017 and early 2021), altcoin seasons reliably followed significant Bitcoin price rallies. After Bitcoin hit new all-time highs and consolidated, investors rotated profits into altcoins seeking higher, more volatile returns, which became an engrained market expectation.
Capital Rotation Theory: The prevailing theory is that once institutional and early investors push Bitcoin's price up, the capital naturally flows into larger altcoins (like Ethereum and Solana), then to mid- and low-cap altcoins, eventually leading to a market-wide surge. Observers expected this pattern to repeat this cycle once Bitcoin stabilized after its initial rally.
Emerging Narratives & Innovation: The rise of new and compelling sectors like AI-integrated tokens, Layer-2 scaling solutions, real-world asset (RWA) tokenization, and GameFi created excitement and a belief that capital would flood into these specific areas, driving a broad "alt season".
Macroeconomic Factors: Expectations of global economic shifts, such as anticipated U.S. Federal Reserve interest rate cuts and potential government stimulus packages, fueled the belief that increased liquidity would flow into riskier assets like altcoins.
Increased Institutional Interest: The approval of spot Bitcoin ETFs in early 2024 brought significant institutional capital into the market, and the subsequent approval of Ethereum ETFs further suggested that institutional interest would expand to a wider range of digital assets beyond just Bitcoin.
Why the Expected Alt Season Has Not Fully Materialized Yet
Fragmented Liquidity: Unlike previous cycles, the sheer number of new tokens (over 40 million) has spread market liquidity thin, preventing a broad, sustained rally across the board.
Dominance of Memecoins and Specific Sectors: Much of the speculative "retail" liquidity that did enter the market flowed into a few high-performing memecoins and specific AI tokens, rather than a broad range of utility altcoins, hindering momentum for a wider alt season.
Macroeconomic Headwinds: Persistent high inflation and interest rates have squeezed consumers, who are the primary source of buying pressure for smaller altcoins, thus slowing the flow of new retail capital.
Psychological Factors: Many retail investors are caught in a "behavioral trap" of denial and hope, waiting for the large altcoin gains seen in previous cycles, which may not align with the current cycle's unique dynamics.
Sustained Bitcoin Dominance: While expected to fall dramatically, Bitcoin's market dominance has remained relatively high compared to previous cycle peaks, indicating that capital is still largely concentrated in BTC and other major, more established altcoins.
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