- Ethereum’s underperformance may have halted the highly anticipated altcoin season in the current market cycle.
- In the last two market cycles, altseasons were triggered as capital flowed from Bitcoin into top altcoins, beginning with ETH.
- Several community members suggested that the launch of Pump.fun has led to massive wealth diversion from top cryptos to lower-cap, short-lived tokens.
Ethereum’s (ETH) struggles in recent months have raised questions about whether the second-largest cryptocurrency is stifling altcoin gains. ETH has historically been a major driver of altseasons, and crypto community members suggest that its current underperformance could prevent a broader altcoin rally.
Meanwhile, Pump.fun has sparked debate, as many believe the platform’s speculative tokens are absorbing liquidity that would typically flow into top altcoins, shifting market dynamics in favor of these short-lived tokens.
Ethereum’s lackluster performance could be hindering the next altcoin season
Ethereum’s lagging performance in the current bull cycle could be costing the broader altcoin market as the much-anticipated altseason continues to stall.
Ethereum’s underperformance partly stems from traders shifting capital to alternative L1s and newer narratives.
As a result, altcoin sentiment has tanked, leading to massive struggles in top tokens across key sectors — down between 50%-90% from their all-time highs, according to data from X user Nemi.
Token drawdowns Vs. All-time highs by narrative: The brutal reality check you didn’t know you needed
Layer 1
– BTC: -9.2%
– ETH: -44%
– SOL: -30%
– BNB: -29%
– SEI: -79%
– APT: -70%
– AVAX: -82%
– FTM: -87% (now SONIC -58%)
– INJ: -73%
– MINA: -95%
– NEAR: -83%
– SUI:…— Nemi ネミ (@Nemi_0x) February 4, 2025
The chart below shows that the altcoin market dominance has been plunging alongside that of Ethereum when compared to Bitcoin.
TOTAL3/BTC, ETH/BTC weekly chart
ETH trader Picolas Cage argued on X that the only way for altcoins to recover in this cycle is if Ethereum sees a recovery. He also noted how ETH has led past altcoin rallies with innovative trends, including ICOs, DeFi Summer and NFTs.
This is visible when observing the previous altseasons in the last two bull markets, where Ethereum’s rally fueled increased capital injection into several other altcoins.
Altseasons are periods of extensive altcoin rallies often spearheaded by ETH. In previous market cycles, altseasons occur when investors rotate capital from Bitcoin into Ethereum and other altcoins.
Pumpfun tokens are drawing capital away from top altcoins
Similarly, the rise of Solana’s Pump.fun has drawn criticism, with many community members arguing that investor interest has shifted from top altcoins toward quick gains from fleeting meme tokens.
Pump.fun quickly became a leader in token launches, raking in over $500 million in revenue since it went live in 2024.
While this may seem positive for the crypto market, community members argued that it has negatively impacted the altcoin market. Several altcoins are seeing lesser inflows due to the attractiveness of the get-rich-quick nature of most meme coins.
“While Pump.fun and the meme coin sector continues to boom, it is clearly at the expense of other assets,” K33 Research noted in its latest report.
For altseason to gain momentum, liquidity would likely need to rotate away from meme coins back into top altcoins, beginning with Ethereum.
Historically, altseasons have occurred about 200 days after Bitcoin’s halving event. It has been over 273 days since the halving, and an altseason has yet to go into full swing.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
