Deck: Why the current altcoin market is unlike any before, and how to navigate it with a proven strategy.
The crypto world is shifting beneath our feet. Since the bull market kicked off in November 2022, altcoins have underperformed Bitcoin by over 55%, despite booming institutional interest, record liquidity, and interest rate cuts. If you’ve been chasing life-changing altcoin gains like those of 2017 or 2021, you’ve likely been disappointed. This isn’t a normal market — it’s a structural change driven by an overwhelming explosion in token supply and shifting macroeconomic forces. Here, you’ll learn why the alt seasons of previous cycles are unlikely to repeat and how to approach altcoin investing with a rigorous three-part framework that targets opportunities with the highest probability of success.
Why the Altcoin Market Looks So Different Today
Back in 2017, there were fewer than 10,000 tradable tokens. By 2021, this ballooned to around 100,000. Now? Over 36 million tokens exist, with more than 10,000 new tokens launched each month.
This massive supply increase has saturated the market. The sheer number of tokens means liquidity and investor attention are spread thinner than ever. To illustrate:
- In 2017, $1 million spread evenly across altcoins meant about $100 per token.
- By 2021, that amount fell to approximately $10 per token.
- Today, it’s less than 3 cents per token.
Such fragmentation stifles the kind of broad altcoin rallies seen in past bull runs. The rapid token creation is mostly driven by speculation. Launching a new coin takes less than 10 minutes, making it easy for projects — including scams — to flood the market. This environment fuels short-term trading and rapid rotation between tokens, rather than conviction in long-term holds.
Shortening Holding Times Reveal Speculation Dominates
Median holding time for new tokens has plummeted:
- 2024: About 6 minutes per token.
- Now: Just 1 minute.
This ultra-short turnover indicates capital barely settles long enough to build momentum. It’s a sign that much of the altcoin market is driven by speculation, not sustainable value.
The Relationship Between Monetary Policy and Altcoin Outperformance
Monetary policy profoundly influences crypto markets. Two key concepts here:
- Quantitative Easing (QE): When the Fed adds liquidity to the market by expanding its balance sheet.
- Quantitative Tightening (QT): When the Fed contracts its balance sheet, reducing liquidity.
Historically, QE correlates with altcoin outperformance and a fall in Bitcoin dominance — the percentage of total crypto market cap held by Bitcoin.
- In 2017 and during the 2019 QE phase, Bitcoin dominance dropped as altcoins thrived.
- Conversely, in 2018, QT pushed Bitcoin dominance higher, signaling altcoin underperformance.
Since late 2022, the Fed has been tightening liquidity, supporting Bitcoin’s strength and altcoins’ lag. But with QT ending soon, the environment may become more favorable for select altcoins.
Three-Part Framework to Navigate the Altcoin Market
Given this complex landscape, here’s the strategic approach investors at Bravo's Research use to find winning altcoins:
1. Monitor Monetary Policy and Liquidity Conditions
Look for signs the Fed is easing liquidity, as this generally encourages investors to take on more risk, benefiting altcoins. Watch Bitcoin dominance trends alongside Fed balance sheet moves as macro indicators.
2. Track Altcoin Momentum Relative to Bitcoin
Invest only in altcoins showing clear strength against Bitcoin. Use moving averages on the altcoin-to-Bitcoin price ratio as a guide.
- Example: Solana outperformed Bitcoin by nearly 9,000% in 2021, indicated by sustained price ratios above key moving averages.
- Contrast with Solana in 2022, when falling below these averages preceded a 90% drop.
- Binance Coin currently shows strong relative momentum, with ratios above all key moving averages, signaling potential outperformance.
3. Assess Altcoin Fundamentals
Examine fundamentals like ETF flows, network activity, and inflation rates of tokens. Strong underlying metrics increase the chances of sustainable growth.
- For instance, Filecoin's inflation rate is a critical factor for determining its long-term viability.
Answer Box: What is Bitcoin Dominance and Why Does It Matter?
Bitcoin dominance measures Bitcoin’s share of the total cryptocurrency market capitalization. When dominance rises, Bitcoin outperforms altcoins; when it falls, altcoins gain ground. Tracking this metric alongside Federal Reserve liquidity actions helps investors predict altcoin season opportunities.
Data Callout: Exploding Supply and Its Impact on Liquidity
More than 10,000 new tokens launch every month — reproducing the entire altcoin ecosystem of 2017 monthly. This dilutes liquidity so much that capital deployment per token has fallen from $100 in 2017 to under 3 cents today, fundamentally changing market dynamics and making wide alt seasons unlikely.
Risks and What Could Go Wrong
- Excessive Speculation: Many tokens lack real use cases — investing without fundamentals can lead to severe losses.
- Liquidity Risk: Oversaturation means some tokens may lack sufficient market depth, creating volatile or illiquid conditions.
- Policy Shifts: Unexpected hawkish moves by the Fed could reinforce Bitcoin’s dominance and suppress altcoin gains.
- Market Sentiment: Broader fear or uncertainty in crypto can undermine all assets, regardless of fundamentals or momentum.
- Scams and Rug Pulls: The ease of launching tokens means many projects are fraudulent, emphasizing the need for rigorous due diligence.
Actionable Summary
- The altcoin market today is vastly more saturated than in previous cycles, reducing broad alt season likelihood.
- Monetary policy, especially Fed liquidity actions, is a key macro driver for altcoin vs. Bitcoin performance.
- Use relative momentum indicators and fundamental metrics to pick altcoins with strong outperformance potential.
- Be cautious of rapid speculation and token oversupply — patience and selectivity are critical.
- Watch Federal Reserve balance sheet moves closely for early signals of favorable altcoin conditions.
Are you ready to dive deeper? Get the full playbook, timely alerts, and detailed trade plans in today’s Wolfy Wealth PRO brief. Our premium members access model portfolios and risk management tools designed for navigating these exact shifting market conditions with confidence.
FAQ
Q1: Why have altcoins underperformed Bitcoin since 2022?
A1: Mainly due to an oversaturated market with millions of tokens diluting liquidity and Federal Reserve tightening reducing risk appetite, driving capital to Bitcoin as a safer crypto asset.
Q2: What signals a good time to increase altcoin exposure?
A2: When the Fed expands its balance sheet (quantitative easing) and Bitcoin dominance starts falling, combined with altcoins showing strong momentum against Bitcoin.
Q3: How can I tell if an altcoin is likely to outperform Bitcoin?
A3: Look for altcoins whose price ratios to Bitcoin are above key moving averages with upward trends, supported by strong fundamental metrics like low inflation and solid network activity.
Q4: Is it risky to invest in new tokens given the current market?
A4: Yes. Most new tokens are speculative or scams. Short holding times and excess supply increase risks, making thorough research essential.
Q5: What is the impact of Fed monetary policy on crypto markets?
A5: Fed policies influence liquidity and risk appetite. Quantitative easing tends to help altcoins, while tightening typically boosts Bitcoin dominance.
Disclaimer: This article is for informational purposes only. It does not constitute investment advice. Cryptocurrency markets are highly volatile and risky. Always conduct your own research and consider your risk tolerance before investing.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile
