Altcoin season is dead? Bitcoin ETF rewrites crypto investment rules

Article Author: Bryan Daugherty

Article Compilation: Block unicorn

Bitcoin exchange-traded products (ETFs) may fundamentally change the concept of "altcoin season" in the crypto market.

For years, the crypto market has followed a familiar rhythm, and capital rotations are nearly predictable. Bitcoin soared, attracting mainstream attention and liquidity, and then funds poured into altcoins. Speculative capital pours into low-cap assets, pushing up their value, which traders excitedly call “altcoin season.”

However, this cycle once taken for granted is showing signs of structural collapse.

Spot Bitcoin Exchange Trading Funds (ETFs) broke the record in 2024, attracting $129 billion inflows. This provides retail and institutional investors with unprecedented investment channels for Bitcoin, but also creates a vacuum that absorbs funds from speculative assets. Institutional investors now have a secure, regulated way to reach cryptocurrencies without taking the “wild west” risk of the altcoin market. Many retail investors have also found that ETFs are more attractive than looking for the next hundredfold token. Well-known Bitcoin analyst PlanB even swapped the actual Bitcoin he held for spot ETFs.

This shift is happening in real time, and altcoins will face a decrease in market liquidity and correlation if funds continue to be locked in structured products.

Is the altcoin season dead? The rise of structured crypto investment

Bitcoin ETFs offer another option to pursue high-risk, low-market capital assets, where investors can gain leverage, liquidity and regulatory transparency through structured products. Retail investors, once the main driver of altcoin speculation, can now invest directly in Bitcoin and Ethereum ETFs, which eliminate self-custody concerns, reduce counterparty risks, and align with traditional investment frameworks.

Institutions are more motivated to avoid the risks of altcoins. Hedge funds and professional trading platforms once chased higher returns in low-liquid altcoins, and now can deploy leverage through derivatives or gain exposure on traditional financial tracks through ETFs.

As the ability to hedge through options and futures increases, the motivation to speculate on altcoins with poor liquidity and low trading volume has been significantly weakened. This trend was further strengthened by arbitrage opportunities brought by record $2.4 billion in February and ETF redemptions, forcing the crypto market into an unprecedented discipline.

 The traditional “cycle” starts with Bitcoin and then enters the altcoin season. Source: Cointelegraph Research

Will venture capital give up crypto startups?

Venture Capital (VC) companies have always been the lifeline of the altcoin season, injecting liquidity into emerging projects and weaving a grand narrative for emerging tokens.

However, as leverage becomes readily available and capital efficiency becomes a key priority, VCs are rethinking their strategies.

VCs strive to achieve the highest return on investment (ROI) possible, but typically ranges from 17% to 25%. In traditional finance, the risk-free interest rate of capital is the benchmark for all investments, usually represented by the yield on U.S. Treasury bonds.

In the crypto space, Bitcoin’s historical growth rate plays a similar benchmark for expected returns. This actually becomes the risk-free interest rate for the industry. Over the past decade, Bitcoin’s compound annual growth rate (CAGR) averaged 77%, significantly surpassing traditional assets such as gold (8%) and the S&P 500 (11%). Even over the past five years, including bull and bear market conditions, Bitcoin's CAGR remains at 67%.

Using this as a benchmark, venture capitalists deploy capital in Bitcoin or Bitcoin-related companies at this growth rate will have a total ROI of about 1,199% in five years, meaning investment will increase by nearly 12 times.

Although Bitcoin remains volatile, its long-term outstanding performance makes it the basic benchmark for evaluating risk-adjusted returns in the crypto space. As arbitrage opportunities increase and risk decreases, VCs may choose safer bets.

In 2024, the number of VC transactions fell by 46%, although overall investment volume rebounded in the fourth quarter. This marks a shift to more selective, high-value projects rather than speculative funding.

Web3 and AI-powered crypto startups still attract attention, but the days of providing indiscriminate funding for every white paper token may be few. New altcoin projects may face serious consequences if venture capital moves further to structured investment through ETFs rather than directly investing in high-risk startups.

Meanwhile, a few altcoin projects that have entered the scope of institutional focus (such as Aptos that recently filed ETF applications) are exceptions, not the norm. Even crypto-index ETFs designed to gain wider exposure are difficult to attract meaningful inflows, highlighting that capital is concentrated rather than decentralized.

Oversupply problem and new market reality

The market structure has changed. The number of altcoins that compete for attention has caused saturation problems. According to Dune Analytics, there are currently more than 40 million tokens on the market. An average of 1.2 million new tokens will be launched per month in 2024, and more than 5 million tokens have been created since the beginning of 2025.

With institutions leaning towards structured investments and lacking retail-driven speculative demand, liquidity no longer flows into altcoins as it used to be.

This reveals the grim fact that most altcoins will not survive. CryptoQuant CEO Ki Young Ju recently warned that most of these assets are unlikely to survive without a fundamental shift in the market structure. “The era of everything going up is over,” Ju said in a recent X post.

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

The crypto market is no longer the same as before. The days of easy, cyclical altcoin rises may be replaced by an ecosystem that determines the flow of funds by capital efficiency, structured financial products and regulatory transparency. ETFs are changing the way people invest in Bitcoin and fundamentally change the liquidity distribution across the entire market.

For those who build on the assumption that there will be an altcoin boom after every bitcoin rise, it may be time to rethink. As the market matures, the rules may have changed.