While many short-term traders are waiting for an altseason, various market data provide a glimpse into why this phenomenon has not yet arrived.
Bitcoin’s (BTC) dominance in crypto-asset capitalization, excluding stablecoins, has been steadily increasing over the past two years. It currently stands at over 60%. This movement, shown below, reflects a lower investment preference in altcoins, i.e. in crypto-assets other than BTC.
Bitcoin market cap dominance in the total cryptoasset market, excluding stablecoins. Source: NYDIG.
Bitcoin 's rise in dominance has taken place since the bearish bottom of 2022, from which point on it began an upward trend. The currency has appreciated by 300% since then, despite trading sideways five months ago below its new all-time high price. This is something that is preventing the possibility of an altseason.
Typically, an altseason—a season in which altcoins outperform Bitcoin—occurs when BTC dominance declines. This is a result of an expansion of bullish sentiment in the market.
According to financial services firm NYDIG, the key question here is: Why is bitcoin dominance still on the rise, even as it nears the end of its second year of positive price gains? “The answer lies in the absence of a compelling new narrative to capture investors’ attention,” it warns.
In a report on the matter, the financial firm recalls that, in the bullish cycle of 2017, Ethereum led to an increase in altcoin dominance. This is due to its role as a platform for decentralized applications (dApps) and a place to raise funds for initial coin offerings (ICOs).
Likewise, in 2020, it indicates that decentralized finance ( DeFi ), non-fungible tokens ( NFT ), and emerging competitors to the Ethereum network took center stage in the attention of altcoins.
In contrast, it says that new altcoin narratives and use cases are currently struggling to gain traction . “While DePin, AI, memecoins, social tokens, web3, gaming, and play-to-earn (P2E) have seen some success, their impact on industry and society remains relatively limited,” NYDIG notes.
In fact, it stresses that memecoins seem to have the most acceptance in the altcoin market despite their lack of utility. However, it clarifies that their popularity peaked six months ago when the price of bitcoin was rising to new all-time highs.
“The dominance of bitcoin and memecoins in this cycle speaks volumes about the creativity of the industry and the practicality of the technology,” the financial firm says. In its view, it is key in this scenario to ask what unique capabilities a cryptocurrency network offers to facilitate use cases.
“If a solution does not require the core principles of blockchain (trustlessness, permissionlessness, and censorship resistance), it may find better utility hosted on a cloud server,” NYDIG believes.
The financial firm sums up that “bitcoin continues to increase in dominance as few competing narratives or large use cases emerge in this cycle.” In this sense, the formation of these aspects, as well as the bullish continuity of BTC, seems key for an altseason to occur.
An altseason in 2025 is possible, according to history and economics
The expected interest rate cut in the United States for the remainder of 2024 and the recent launch of Ethereum ETFs may boost demand for altcoins. Therefore, it seems key to closely monitor how Bitcoin's dominance continues in the coming months.
“Altcoins have significantly underperformed BTC over the past two years, but a potentially looser monetary policy in the year following the halving is the perfect breeding ground for speculation and short-term retail interest,” financial consultant Nikolai Galozi recently.
With the fourth Bitcoin halving having occurred four months ago, Galozi expects Bitcoin's bullish trend to intensify in 2025, as it usually does in the year following such an event. He therefore expects altcoins to soar then, although he believes it is crucial to be careful because many disappear forever in the bear market.
