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The CEO of the blockchain intelligence platform CryptoQuant explains that the anticipated altcoin bull market will differ from previous cycles. On-chain analyst Ki Young Ju stated via social media platform X that the liquidity flowing from Bitcoin 
$105,994 to altcoins will not match the levels observed in earlier periods.
Increased Institutional Participation
Ju highlighted that institutional participation in Bitcoin has increased, impacting the altcoin markets. The rise in spot market Bitcoin exchange-traded funds (ETFs) and software company MicroStrategy’s (MSTR) growing purchases leads to Bitcoin drifting away from the crypto ecosystem.
The analyst remarked, “This altcoin bull market will not be as expected. It will be strange and challenging. Only a select few will win the game. Market sentiment is good, but new liquidity is limited.” He noted that a paper-based second-layer ecosystem for Bitcoin has been established through ETFs, MSTR, and funds. In the 2021 bull market, strong volumes in options and futures contributed to concerns that the liquidity in spot markets would be significantly reduced. Now, with MSTR and ETFs, if we also consider proxy ETFs, liquidity will be more fragmented than in previous cycles.
Relationship Between Bitcoin and Altcoins
Ju shared a graph illustrating the declining price correlation between Bitcoin and altcoins. Previously, altcoins displayed a high correlation with Bitcoin, but now only a few altcoins are showing independent trends.
“Bitcoin spot ETFs now hold as much BTC as believed to be held by Satoshi Nakamoto (Patoshi).”
Additionally, the analyst noted that Bitcoin ETF demand has remained strong until the first approvals at the beginning of the year. He expressed that interest in Bitcoin ETFs is at historical peaks.
“The demand for Bitcoin ETFs is as strong as this year’s initial approvals.”
Ju asserted that the transition of Bitcoin’s paper-based second-layer ecosystem to altcoins is impossible. This situation necessitates that altcoins grow independently and secure their liquidity flows. If ETF applications for assets like XRP and SOL create secondary markets for these altcoins, we might see days when these expectations are better priced.
For crypto investors, these developments indicate the need to reassess strategies during the altcoin bull market. The diminished flow of liquidity from Bitcoin to altcoins suggests that altcoin markets will become more independent and reliant on various factors.
