The Altcoin winter could last for major challenges such as low liquidity, domination of Bitcoin amid geopolitical instability, and severe market dilution.
While some major altcoins may still be possible in the future, the big picture suggests that this difficult stage is unlikely to end soon. Here are the top three reasons.
#1. Trading data shows investors still ignoring Altcoins
According to Cryptoquant, “Altcoins’ one-year buy/sell quote difference” is currently $36 billion, showing no signs of recovery.
This metric reflects the gap between the estimated volume of Altcoins buy and sales. A minus $36 billion reading means that Altcoins’ total selling estimates have exceeded $36 billion over the past year.
Investors sell Altcoins more than buy. This tendency can be attributed to risk aversion feelings and the belief that altcoins are no longer attractive in the short term.
“Bitcoin enjoys the Bull Run, but altcoins are still acting like winter. I hope that a full-fledged alto season and altcoin FOMO may be hopeful unless this metric is beginning to rise again,” commented analyst Burakkesmeci.
So, to see the start of the AltCoin season, you need to make sure this metric rises or tests positive.
#2. Geopolitical tensions strengthen the control of Bitcoin
In recent years, the Israeli-Iran conflict, global geopolitical tensions have created an environment that is disadvantageous for altcoins.
When Israel attacked Iran, the price of Bitcoin fell, but the altcoin suffered even greater losses. Meanwhile, when Bitcoin gathered, Altcoins overshadowed the attention of investors and most of their capital. This pattern has been going on since the beginning of this year.
As a result, Bitcoin domination (BTC.D) rises in both scenarios. In fact, BTC.D has posted six consecutive Green Weekly Candles, holding over 64%.
Some analysts argue that if it weren’t for the Israeli-Iran conflict, Altseason could have started in June.
“The Altcoin season has almost begun… Ethereum surpassed the Israeli-Iran war for a week, and perhaps WW3 has begun. Now, BTC’s domination is approaching five years’ height, and is very far from Altseason.
Furthermore, current geopolitical disputes are unlikely to be resolved within weeks or months. This means that feelings of risk aversion probably continue to dominate the market and put the altcoin at a disadvantage.
#3. Altcoin record numbers dilute the market
The third reason is the explosion of altcoin numbers.
By June, the number of Altcoins had exceeded 1,734 million, according to Coinmarketcap. This is an 850-fold increase compared to December 2021. Meanwhile, Altcoin’s market capitalization (total of 2) is $1.13 trillion, 30% below the second half of 2021 peak.
This explosion has created an overly fragmented market. Capital inflows have decreased and spread too much. It can attract investors’ attention.
Even if AltSeason occurs, it is probably very selective. Coins like Ethereum, Solana, and XRP may benefit, but most small Altcoins struggle to break out.
This dilution reduces the likelihood that new or lesser-known projects will be successful. Also, investors will be more cautious when choosing which altcoins to back.
As a result, most altcoins are still left, even in the most optimistic scenarios.
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