Why So Many People Were Wrong About Altcoins

Key Concepts

Bitcoin Dominance: The percentage of the total cryptocurrency market capitalization held by Bitcoin. A rising dominance suggests capital flowing into Bitcoin and out of altcoins.
Quantitative Tightening (QT): A contractionary monetary policy where a central bank reduces the money supply by selling assets.
Quantitative Easing (QE): An expansionary monetary policy where a central bank increases the money supply by purchasing assets.
Fed Funds Rate: The target interest rate set by the Federal Reserve for banks to lend reserves to each other overnight.
2-Year Yield: The return an investor receives on a 2-year U.S. Treasury bond. Often used as an indicator of economic expectations.
Alt Season: A period where altcoins significantly outperform Bitcoin.
Total 3 (TOTAL3): A metric representing the total market capitalization of all cryptocurrencies excluding Bitcoin.
USDT (Tether): A stablecoin pegged to the US dollar, often used as a safe haven in crypto markets.
Social Interest/Risk: Measures of retail investor engagement and sentiment in the cryptocurrency market, often tracked through social media and search trends.
Asymptotically to Zero: A mathematical concept describing a value approaching zero but never actually reaching it, used to illustrate the long-term tendency of altcoins to lose value against Bitcoin.

Monetary Policy and the Missed Alt Season

The core argument of this analysis is that the expectation of an alt season in 2023-2025 was fundamentally flawed because it failed to account for prevailing monetary policy. Historically, alt seasons have coincided with periods of looser monetary policy – specifically, when the Federal Funds Rate falls below the 2-year Treasury yield. This indicates a shift towards lower interest rates and increased liquidity, creating a favorable environment for risk assets like altcoins.

The speaker highlights a crucial parallel between the 2018-2019 cycle and the 2022-2025 cycle: both featured periods of Quantitative Tightening (QT) by the Federal Reserve. In 2019, Bitcoin topped out approximately two months before QT ended. Remarkably, the same pattern occurred in 2025, with Bitcoin peaking around two months before the conclusion of QT. This suggests a strong correlation between QT and Bitcoin’s performance, with Bitcoin benefiting from the relative scarcity of capital during tightening cycles.

The Total 3 – USDT / Bitcoin Market Cap Chart

A key chart presented is “Total 3 minus USDT divided by Bitcoin Market Cap.” This metric, representing the collective altcoin market capitalization relative to Bitcoin, is considered a vital indicator. The chart reveals that altcoins have largely been bleeding against Bitcoin since September 2021. The speaker urges viewers to save this chart in TradingView for ongoing analysis. He notes that previous alt seasons (2017 and 2021) were preceded by periods where this ratio approached, and eventually surpassed, key levels.

He emphasizes that no alt season has historically occurred before the Total 3/Bitcoin ratio reaches 0.25 (meaning altcoins represent 25% of Bitcoin’s market cap). Calls for an alt season in 2023 and 2024 were therefore premature, as this ratio hadn’t reached that threshold. Even when the ratio briefly approached 0.25 in October 2025 (including USDC), it didn’t signify the start of a sustained alt season, mirroring the pattern observed in the 2019 cycle where multiple dips below this level preceded the actual alt season.

Historical Parallels and the 2019 Cycle

The speaker draws strong parallels between the current cycle and the 2019 cycle. In 2019, Bitcoin experienced a bull market during QT, with Bitcoin dominance increasing while altcoins bled against it. This pattern repeated in 2025. Crucially, in 2019, altcoins didn’t immediately rotate upwards after the Bitcoin top; they bottomed against Bitcoin only after QT ended, and even then, remained suppressed for a year and a half before a true alt season materialized. This delay was attributed to the market’s need for significantly looser monetary policy – rate cuts and quantitative easing.

He argues that the expectation of an immediate rotation into altcoins after the 2025 Bitcoin top was a misapplication of historical patterns. The speaker contends that simply knowing the dynamics of the 2019 cycle would have positioned investors to be bullish on Bitcoin dominance and to fade the altcoin market for the past four years.

Retail Interest and Bitcoin’s Apathetic Top

Beyond monetary policy, the speaker highlights the lack of retail investor enthusiasm as a key factor. He points to a decline in “social interest” – a metric tracking retail engagement – compared to the peaks seen in 2017 and 2021. In those previous cycles, alt seasons were fueled by surging retail interest. The current cycle, however, has been characterized by lower highs and lower lows in social interest, resembling the 2018-2019 period.

This lack of enthusiasm suggests that Bitcoin topped on “apathy” rather than “euphoria.” In contrast to 2017 and 2021, where Bitcoin topped amidst widespread retail frenzy and a subsequent rotation into altcoins, the 2025 top occurred with relatively muted investor excitement. This resulted in Bitcoin slowly bleeding out, with altcoins declining even more sharply.

The Asymptotic Decline of Altcoins and Bitcoin’s Primacy

The speaker introduces the concept of altcoins “asymptotically going to zero against Bitcoin.” This means that, over the long term, altcoins are likely to lose value relative to Bitcoin, approaching zero but never quite reaching it. He extends this concept to miners and even treasury companies, suggesting a fundamental dynamic where Bitcoin consistently outperforms other crypto assets over extended periods.

He stresses that Bitcoin doesn’t need altcoins to succeed. Bitcoin can thrive independently, and the failure of altcoins to participate in a bull market is not Bitcoin’s fault. He argues that Bitcoin represents the “best of the cryptoverse” and is likely to remain dominant in the future.

Potential Future Scenarios and Cautions

The speaker acknowledges the possibility of a counter-trend rally in early 2026, potentially leading some altcoins to new all-time highs. However, he believes it’s unlikely that the collective altcoin market will outperform Bitcoin during this rally. He anticipates a bounce similar to the one seen in 2019, followed by a resumption of the downtrend.

He cautions against mistaking a temporary rally in a few altcoins for a true alt season. He suggests monitoring the 50-week moving average as a potential resistance level. He also highlights the importance of recognizing that the current bear market may require one or two counter-trend rallies before a true bottom is established.

Liquidity, M2, and Bitcoin as a Leading Indicator

The speaker challenges the common belief that liquidity (measured by M2 money supply) is a leading indicator for Bitcoin. He argues that the historical data suggests the opposite: Bitcoin leads liquidity. He points out that in previous cycles, Bitcoin topped before liquidity peaked.

He warns against relying on M2 to time market movements, arguing that by the time changes in M2 are reflected in the news, Bitcoin has already priced them in. He emphasizes that markets are forward-looking and that Bitcoin’s ability to anticipate changes in liquidity is one of its key strengths.

Notable Quote: “Bitcoin does not owe the altcoin market anything.” – This encapsulates the speaker’s core argument that Bitcoin’s success is independent of the performance of altcoins.

Conclusion:

The analysis concludes that the widespread expectation of an alt season in 2023-2025 was a result of ignoring crucial macroeconomic factors, particularly monetary policy. By failing to recognize the parallels with the 2019 cycle and the importance of retail interest, investors were led astray. The speaker advocates for a focus on Bitcoin dominance, monitoring monetary policy, and understanding the long-term tendency of altcoins to underperform Bitcoin. He emphasizes that a counter-trend rally in 2026 is possible, but it shouldn’t be mistaken for a true alt season. Ultimately, the key takeaway is that successful crypto investing requires a disciplined, objective approach grounded in fundamental analysis rather than speculative hype.