Original author: kyle_chasse
Original translation: TechFlow
The crypto market used to have a classic script: Bitcoin rose first, and then altcoins rotated.
The bull markets in 2017 and 2021 have verified this law. Bitcoin has become a bridgehead for funds, attracting a large influx of funds, which then flow into altcoins, driving the prosperity of the entire market.
However, this model appears to have broken down in 2025.
ETF funds are locked up and liquidity is exhausted
Institutionalization effect: ETF funds are not for speculation, but for long-term holding. This has led to a significant decline in market liquidity and altcoins have lost the opportunity to rotate.
Data comparison: In 2021, the total market value of altcoins accounted for 38.7% of the crypto market, but by 2025, this proportion had dropped to 14.2%.
The proliferation and dilution of altcoins
The number of altcoins on the market has surged from a few thousand in 2021 to 12 million (including long-tail tokens and MEME coins) in 2025. The proliferation of tokens has led to a diluted market, making it difficult for high-quality projects to stand out, while low-quality projects have flooded the market.
In 2021, there were only 300 tokens on the Binance platform, but now there are more than 12 million tokens tracked by CoinMarketCap. Such a huge growth has not only failed to bring innovation, but is full of junk tokens.
Many retail investors suffered heavy losses in the MEME tokens in the Solana ecosystem and opaque Telegram transactions, and their funds were basically unable to be recovered after the loss.
MicroStrategy, the new “new altcoin” for institutions
In the crypto market in 2025, the behavior patterns of institutional investors have changed fundamentally. They no longer rely on altcoins to pursue high returns, but choose to leverage through Bitcoin.
MicroStrategy (MSTR) has become the new altcoin for institutional investors. By issuing bonds to buy Bitcoin and then using Bitcoin as collateral for financing, MicroStrategy provides institutions with a low-risk, high-leverage investment method.
MicroStrategy currently holds more than 300,000 bitcoins, with an average purchase cost of about $13,900, while the current price of bitcoin is much higher than this level. In contrast, institutions do not need to take risks in altcoins, but can indirectly hold bitcoins and enjoy leveraged returns directly through MicroStrategys stocks.
Institutions preference for MicroStrategy further squeezes the living space of altcoins.
The “clearing” of the altcoin market is accelerating. With the withdrawal of institutional funds and the depletion of retail funds, many projects have become “unloved”.
A large number of MEME tokens in the Solana ecosystem became a game of pass the parcel, and ultimately most retail investors became the bag holders.
In 2024, only 3.7% of the 870,000 MEME tokens issued on the Solana chain survived for more than 30 days. After the loss of funds, these tokens have basically no chance of recovery.
New rules of survival in PVP mode
As the traditional buy-hold-wait rotation investment logic becomes invalid, the crypto market has entered a new stage of player-versus-player (PVP), where only those who discover the trend first can profit, while most people become exit liquidity.
The cyclical investment strategy of the past - buy altcoins and wait for the bull market rotation - has become ineffective.
Today, the market has become even more brutal: if you are not one of the first to enter a trend, you are likely to become the exit liquidity for other players.
Binance founder CZ once said that if 99% of traders choose to hold Bitcoin, their returns will be much higher than speculating in altcoins.
Even though most altcoins have lost value, a few quality projects still have the potential to rise in the future.
When the price of Bitcoin rises sharply, market funds may still flow to a small number of high-quality projects, but this is more like a selective market rather than a full-scale altcoin season.
The question is not if there will be an opportunity, but when will there be an opportunity.
Although the current market environment is extremely unfavorable to altcoins, it does not mean that they have no future at all. A few truly valuable projects may survive the test of time and occupy a place in the future market.
Characteristics of high-quality projects: real-world application scenarios (such as DeFi protocols), strong community support, and long-term technical accumulation.
Bitcoins dominance will be further strengthened. With the popularity of ETFs and the continued inflow of institutional funds, Bitcoin may become an asset similar to digital gold and its volatility will gradually decrease.
The crypto market in 2025 is undergoing profound changes.
The old rotation logic has become invalid, and new rules are being established. In this process, most projects will be eliminated, while a few high-quality projects will usher in new opportunities. For investors, understanding the new rules of the market and avoiding becoming exit liquidity are the keys to future success.
