Is the altcoin season dead? Bitcoin ETFs rewrite the rules of crypto investing

Written by: Bryan Daugherty Translated by: Block unicorn

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

For many years, the crypto market has followed a familiar rhythm, and the rotation of funds has been almost predictable. Bitcoin soared, attracting mainstream attention and liquidity, and then funds poured into altcoins. Speculative capital poured into low-market-cap assets, pushing up their value, and traders excitedly called it the "altcoin season."

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

Spot Bitcoin exchange-traded funds (ETFs) broke records in 2024, attracting $129 billion in inflows. This has provided retail and institutional investors with unprecedented access to Bitcoin, but it has also created a vacuum that has sucked money away from speculative assets. Institutional investors now have a safe, regulated way to get exposure to cryptocurrencies without the "Wild West" risk of the altcoin market. Many retail investors have also found ETFs more attractive than looking for the next 100x token. Well-known Bitcoin analyst PlanB even swapped his actual Bitcoin holdings for spot ETFs.

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

Is the Altcoin Season Dead? The rise of structured crypto investing

Bitcoin ETFs offer an alternative to chasing high-risk, low-market-cap assets, where investors can gain leverage, liquidity, and regulatory clarity through structured products. Retail investors, once the primary driver of altcoin speculation, can now invest directly in Bitcoin and Ethereum ETFs, instruments that eliminate self-custody concerns, reduce counterparty risk, and align with traditional investment frameworks.

Institutions have greater incentive to avoid altcoin risk. Hedge funds and professional trading platforms, which once chased higher returns in illiquid altcoins, can now deploy leverage through derivatives or gain exposure on traditional financial rails through ETFs.

With the increased ability to hedge through options and futures, the incentive to speculate in illiquid, low-volume altcoins has significantly diminished. This trend was further reinforced by the record $2.4 billion in outflows and arbitrage opportunities created by ETF redemptions in February, forcing crypto markets into an unprecedented level of discipline.

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

Will venture capital abandon crypto startups?

Venture capital (VC) firms have historically been the lifeblood of the altcoin season, injecting liquidity into emerging projects and weaving grand narratives for emerging tokens.

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

VCs strive to achieve the highest possible return on investment (ROI), but the typical range is between 17% and 25%. In traditional finance, the risk-free rate on capital is the benchmark for all investments, typically represented by the U.S. Treasury yield.

In the crypto space, Bitcoin’s historical growth rate serves a similar role as an expected return benchmark. This effectively becomes the industry’s risk-free rate. Over the past decade, Bitcoin’s compound annual growth rate (CAGR) has averaged 77%, significantly outperforming traditional assets such as gold (8%) and the S&P 500 (11%). Even over the past five years, which includes both bull and bear market conditions, Bitcoin’s CAGR has remained at 67%.

Using this as a benchmark, a venture capitalist deploying capital in Bitcoin or Bitcoin-related businesses at this growth rate would have a total ROI of approximately 1,199% over five years, representing a nearly 12-fold increase in investment.

While Bitcoin remains volatile, its long-term outperformance makes it a fundamental benchmark for assessing risk-adjusted returns in the crypto space. As arbitrage opportunities increase and risk decreases, VCs may opt for safer bets.

The number of VC deals fell 46% in 2024, although overall investment volume recovered in the fourth quarter. This signals a shift toward more selective, high-value projects rather than speculative funding.

Web3 and AI-driven crypto startups still attract attention, but the days of indiscriminate funding for every token with a white paper may be numbered. New altcoin projects could face serious consequences if venture capital further shifts toward structured investments through ETFs rather than investing directly in high-risk startups.

Meanwhile, the few altcoin projects that have made it onto the institutional radar, such as Aptos, which recently filed for an ETF, are the exception rather than the norm. Even crypto index ETFs designed to gain broader exposure have struggled to attract meaningful inflows, highlighting that capital is concentrated, not dispersed.

Oversupply Issues and New Market Realities

The market landscape has changed. The sheer number of altcoins vying for attention has created saturation issues. According to Dune Analytics, there are currently more than 40 million tokens on the market. An average of 1.2 million new tokens were launched each month in 2024, and more than 5 million tokens have been created since the beginning of 2025.

With institutions gravitating toward structured investments and a lack of retail-driven speculative demand, liquidity is no longer flowing into altcoins as it once did.

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

In an era where money is locked up in ETFs and perpetual contracts rather than flowing freely into speculative assets, the traditional strategy of waiting for Bitcoin’s dominance to wane before moving into altcoins may no longer apply.

The crypto market is not what it used to be. The days of easy, cyclical altcoin rallies may be replaced by an ecosystem where capital efficiency, structured financial products, and regulatory clarity determine where money flows. ETFs are changing the way people invest in Bitcoin and fundamentally altering the distribution of liquidity across the market.

For those who built on the assumption that every Bitcoin rally would be followed by an altcoin boom, it might be time to reconsider. As the market matures, the rules may have changed.