jakiro
Author: Wintermute; Source: X, @wintermute_t; Compiler: Shaw Bitcoin Vision
Market tone improved as positions were adjusted and some risk assets returned.Bitcoin may need to get closer to its all-time highs for altcoins to rebound and market breadth to expand.Upcoming U.S. regulatory and political headlines are the next key drivers of market volatility.
Market Macro Update
There has been more of a shift in tone than direction in the market this week.The impact of the sharp decline in October has basically subsided, and positions have been adjusted.While cryptocurrencies still lag other risk assets, the overall sentiment appears less fragile.News headlines fueled the situation.Trump’s proposed $2,000 “stimulus package” (via tariff rebates) briefly boosted market risk sentiment over the weekend, and although it was subsequently reinterpreted as a tax break, it still achieved its purpose: reminding markets that fiscal support is still in effect.In addition, renewed hopes for an end to the U.S. government shutdown and softer macroeconomic data have provided traders with reasons to selectively take risks.Digital assets remain the worst-performing cross-asset class, suggesting market sentiment may be improving but capital flows have yet to catch up.
Bitcoin prices have been holding around $105,000 and Ethereum prices have been around $3,500, with both showing resilience despite a week of outflows from ETFs.Altcoins rebounded on Monday, but the recovery has been highly uneven.The GMCI-30 index closed up 0.7% this week, with leading sectors including:
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DePIN: +22%
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L2s: +13%
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Mid Caps: +15%
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AI: +9.6%
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DeFi: +8.8%
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Utilities: +5.9%
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L1s: -1%
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Memes: +4.6%
This rotation reflects the current level of risk appetite.Investors are adding to their holdings, but not by much.The rise in GMCI is mainly the result of the weekend rebound rather than a structural change in capital flows.The market breadth is still extremely narrow, with only a few currencies (such as FIL, AR, etc.) contributing most of the gains.Breakout moves still look far-fetched, concentrated in a few momentum sectors that are fragile and prone to fading quickly.
The macro environment remains favorable.Rate cuts are underway, quantitative tightening has ended, and global easing continues.The Overnight Financing Rate (SOFR) is falling and is generally in line with policy rates, albeit with a slight lag.However, the performance of cryptocurrencies is different from other risk assets: the speculative component is reduced, the rebound is limited and the rotation is frequent, and funds are more inclined to hold mainstream coins rather than fringe altcoins.
Based on the current trading situation of mainstream coins, it seems unlikely that the rising season of altcoins will come anytime soon.Judging from historical data, when mainstream currencies are close to historical highs, altcoins usually perform better, thus bringing about wealth spillover effects.When the price of Bitcoin is between 10% and 20% from its all-time high (currently 16%), the probability of Bitcoin outperforming altcoins is about 54%.When the price of Bitcoin drops to close to $100,000, the probability of Bitcoin outperforming altcoins even increases to about 58% based on historical data.
This shows that the dynamics of the spillover effect can be seen numerically, and also explains why last week’s rally in currencies such as FIL, ICP, FET, etc. was so fragile and has completely faded as the market failed to get a confirmation signal from Bitcoin that the trend continued.
But that doesn’t mean that all altcoins outside of the mainstream coins are dead.A few blue-chip currencies (such as HYPE, ENA, UNI, etc.) have continued to outperform the market with their relative strength under the influence of catalysts, thanks to clearer regulatory signals in the United States and rumors of the restart of the domestic market.But the broader altcoin market remains as volatile as the options market: After a brief period of upward momentum, it will be difficult to sustain strength unless Bitcoin prices rise.It is difficult to predict a sustained rise in the altcoin market until the mainstream coins regain their dominance.
Our point of view
The strong market environment and renewed momentum have enhanced people’s confidence in the continued trend of this market.The question now is whether the mainstream currency indexes can rebound to higher levels before market breadth can recover.
Positions have been rebalanced, market sentiment has improved, and the market is finally balancing out after weeks of volatility.Cryptocurrencies remain the worst-performing cross-asset class, but the overall market tone has shifted: October’s rout appears to be behind us, and selective risk appetite is returning.The rebound of DePIN, L2 and AI sectors shows that the market still has demand for related fields. However, the market breadth is still narrow and the market structure is relatively fragile.
In the next stage, mainstream currencies need to lead the market.History shows that altcoins only follow suit when Bitcoin trades near its all-time highs.With the current price of Bitcoin around $105,000 (down 16% from its all-time high), this rotation has not yet been triggered.This looks more like a transition period than a period of stagnation: the structure is clearer, the macro environment is favorable, and the market seems poised to rise again.As news about the resumption of U.S. regulations is about to be announced, the next round of fluctuations is likely to stem from policy and political factors rather than position adjustments.
