Bitcoin ETF triggers market shift, "altcoin season" may become history

The emergence of Bitcoin exchange-traded funds (ETFs) may fundamentally change the concept of "altcoin season" in the cryptocurrency market. For a long time, the crypto market has followed a predictable flow of funds: when Bitcoin's price rises, it attracts mainstream attention and liquidity, leading to a surge of funds into alts. Speculators flock to low market cap assets, driving up their value, a phenomenon known as "altcoin season."

However, this cycle, which was once taken for granted, is showing signs of structural collapse. In 2024, the spot Bitcoin ETF attracted a record $129 billion in inflows, providing retail and institutional investors with an unprecedented avenue for Bitcoin investment. This not only created a vacuum that siphons off funds from speculative assets but also offered institutional investors a safe and regulated way to access cryptocurrencies without bearing the high risks of the altcoin market. Many retail investors also found ETFs more attractive than seeking out small coins with potential high returns.

This transition is happening in real time. If funds continue to be locked in structured products, alts will face a situation of reduced market liquidity and lower correlation.

The Rise of Structured Crypto Investments

Bitcoin ETFs provide investors with an alternative to high-risk, low market cap assets. Through structured products, investors can gain leverage, liquidity, and regulatory transparency. Retail investors who once fueled altcoin speculation can now directly invest in Bitcoin and Ethereum ETFs, which reduce self-custody risks and counterparty risks while aligning with traditional investment frameworks.

Institutional investors are more inclined to avoid the risks of altcoins. Previously, hedge funds and professional trading platforms chased high returns in low-liquidity altcoins, but now they can use leverage through derivatives or gain exposure via ETFs in traditional financial channels.

As the ability to hedge through options and futures has increased, the motivation to speculate on illiquid, low-volume altcoins has significantly diminished. The record $2.4 billion outflow of funds in February and the arbitrage opportunities brought about by ETF redemptions further reinforced this trend, forcing the crypto market into an unprecedented state of discipline.

Shift in Venture Capital Strategies

Venture capital (VC) firms have always been a significant driving force during altcoin seasons, injecting liquidity into emerging projects and building grand narratives for new tokens. However, as leverage becomes more accessible, capital efficiency is becoming a key priority, and VCs are rethinking their strategies.

In the cryptocurrency space, the historical growth rate of Bitcoin has effectively become the industry’s risk-free interest rate benchmark. Over the past decade, Bitcoin's compound annual growth rate (CAGR) has averaged 77%, far exceeding traditional assets like gold (8%) and the S&P 500 index (11%). Even during the bull and bear markets of the past five years, Bitcoin's CAGR has remained at 67%.

Based on this, venture capitalists are deploying capital in Bitcoin or related businesses, with a total investment return rate of nearly 1,199% over five years, meaning the investment will increase almost 12 times. Although Bitcoin remains volatile, its long-term outstanding performance makes it a benchmark for assessing risk-adjusted returns in the crypto space.

In 2024, the number of VC transactions decreased by 46%, although the overall investment volume rebounded in the fourth quarter. This marks a shift towards more selective, high-value projects. Web3 and AI-driven crypto startups continue to attract attention, but the era of providing indiscriminate funding for every token with a white paper may be coming to an end.

Supply Surplus and New Market Realities

The market landscape has undergone a fundamental change. The sheer number of alts competing for attention has led to a serious saturation problem. Data shows that there are currently over 40 million types of tokens in the market. An average of 1.2 million new tokens are launched each month in 2024, and since the beginning of 2025, over 5 million types of tokens have been created.

As institutions lean towards structured investments and the lack of retail-driven speculative demand, liquidity is no longer flowing into alts as it once did. This reveals a stark reality: most alts will struggle to survive. Analysts warn that without a fundamental shift in market structure, most of these assets are unlikely to survive.

In an era where funds are locked in ETFs and perpetual contracts rather than freely flowing into speculative assets, the traditional strategy of waiting for Bitcoin's dominance to weaken before turning to alts may no longer be applicable.

The crypto market has changed drastically. The era of easy and periodic altcoin surges may be replaced by an ecosystem where capital efficiency, structured financial products, and regulatory transparency dictate the flow of funds. ETFs are changing the way people invest in Bitcoin and fundamentally altering the liquidity distribution of the entire market.

For those who have based their assumptions on the idea that alts thrive after each Bitcoin rise, it may be time to reconsider. As the market matures, the rules of the game may have changed.