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A recent report from Kaiko Research highlights the relationship between Bitcoin (BTC) rallies and altcoin performance to gauge these assets’ potential next moves amid broader market challenges.
Bitcoin And Altcoins Struggle To Recover Previous Peaks
Historically, strong Bitcoin performance has often triggered what is known as «altcoin season,» when investors rotate profits from Bitcoin into altcoins, spurring broader market growth.
However, as the market enters the second quarter (Q2) of the year, the landscape appears more complex, with many altcoins still struggling to reach their previous highs from 2021 and 2022.
Despite Bitcoin hitting a new all-time of $109,000 earlier this year, the sentiment surrounding altcoins remains mixed. Many altcoins have not recovered to their peak levels, and trading activity is increasingly concentrated around a select few tokens.
The report highlights that while Bitcoin has shown resilience, particularly in light of increasing interest from institutional investors, altcoin trading volume has surged, signaling a shift in capital allocation preferences.
The impact of higher global interest rates has also reshaped investor risk appetite. Unlike the liquidity-driven bull runs of 2021 and 2022, the current environment is characterized by tighter monetary policy, prompting traders to be more cautious and selective.
The report outlines a notable divergence in altcoin performance following the US elections last November. While Bitcoin reached new heights, many altcoins remained below their previous peaks.
Large-cap coins like Solana (SOL) and XRP experienced significant surges; however, mid- and small-cap altcoins have had a harder time keeping pace. In fact, small-cap altcoins tracked by Kaiko’s Small-Cap Index have seen declines of over 30%.
Post-Election Confidence Boosts US-Based Projects
Despite these challenges, altcoin trading volume has rebounded, with dominance relative to Bitcoin reaching levels not seen since 2021. However, this volume growth is not evenly distributed; the top 10 altcoins now account for an astonishing 64% of total trading volume, indicating a significant concentration of liquidity.
According to Kaiko’s report, this trend underscores a shift from a more speculative retail-driven market to one favoring institutional investment in a narrow selection of high-liquidity assets.
The research firm also highlights the increasing institutional interest in altcoins, evidenced by a wave of ETF filings. This interest persists even as retail sentiment remains weak, suggesting that institutions are responding positively to regulatory clarity in the US.
The recent easing of regulatory pressures, including the US Securities and Exchange Commission’s (SEC) decision to drop lawsuits and repeal restrictive rules, has fueled optimism among investors.
US-based projects are performing notably well post-election, reflecting a shift in confidence towards domestic initiatives. However, this does not necessarily signal the onset of a broad altcoin season, according to Kaiko.
Lastly, the report concludes that as President Trump’s proposals to make the US a crypto hub gain traction, there is a concern that this focus may favor domestic projects over international altcoins, limiting the potential for a widespread rally across the altcoin market.
At the time of writing, the market’s largest altcoin, Ethereum (ETH), is consolidating at $1,800, down 45% year-to-date, further highlighting the challenges facing these assets.
Featured image from DALL-E, chart from TradingView.com
