Every altcoin season in the past has been characterized by heavy liquidity rotation, allowing altcoins to achieve impressive upside. Analysts expected such an outcome this year, especially after Bitcoin achieved new historic highs, followed by a decline in dominance below 60%.
However, altcoin season has not really taken off in 2025 despite multiple indicators pointing in its favor. The chances of a major altcoin rally have been diminishing, especially with only a few weeks left until the year comes to a close. Let’s dive into some of the reasons why altcoin season expectations missed the mark this year.
### Institutional Influence on Liquidity Flows
Institutions played a big part in steering liquidity flows in the market this year. Ethereum and Bitcoin ETFs ensured that institutional liquidity mostly focused on these two coins. As a result, the top cryptocurrencies enjoyed the bulk of price movements, which shifted attention away from altcoins.
According to the latest Global Crypto Hedge Fund report, exposure to crypto surged to 55% of hedge funds in 2025, compared to 47% in 2024. The report also revealed that this exposure was mostly through ETFs, derivatives, tokenized assets, and equities, reinforcing the institutional preference for Bitcoin and Ethereum.
### Macro Factors That Weakened Altcoin Season Attempts in 2025
While institutions predominantly favored ETH and BTC, there were periods when liquidity rotation accelerated. This was particularly the case in Q3, when Bitcoin came off new highs and its dominance slid below 60%. Unfortunately, altcoins did not benefit fully from this increased demand due to several macroeconomic disruptions.
For example, the threat of tariffs 2.0 emerged around the same time altcoins appeared to be on the right side of liquidity rotation. The tariff war negatively impacted market sentiment, causing liquidity outflows from risk-on assets like altcoins.
Furthermore, ongoing concerns about inflation and recession risks also dampened investor confidence. These factors pushed Bitcoin dominance back above 60%, as investors typically become more conservative and risk-averse during times of high uncertainty.
Interestingly, Bitcoin dominance retreated below 60% once again this week, signaling that investors are increasingly eyeing altcoins as the market attempts to recover from the latest downtrend. The same Global Crypto Hedge Fund report highlighted a growing institutional appetite for DeFi, suggesting that demand could soon spread beyond Bitcoin and Ethereum to other coins.
### Rising Derivatives Demand and Leverage
Many altcoins have seen record-high levels of open interest in recent months. This trend indicates that traders are opting to secure exposure through the derivatives market rather than the spot market.
While derivatives offer flexibility, this focus has drained liquidity from the spot markets, limiting altcoins’ ability to sustain significant price gains. Additionally, increased leverage in the system has set up altcoins for heavy liquidations and extreme volatility.
This was especially evident in October during the flash crash, which resulted in the highest liquidation event ever recorded in crypto history.
### Looking Ahead: Is Altcoin Season Still Possible?
Despite an overall bearish market performance, excitement has been building around certain altcoins this week. Some analysts remain optimistic about the possibility of an explosive bullish conclusion to 2025.
Moreover, with global liquidity conditions improving, the bull run could potentially extend into 2026. This suggests that altcoin season might be delayed but still has the potential to live up to expectations.
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By understanding these factors, investors can better navigate the crypto market and position themselves for the next wave of altcoin growth. Stay tuned as 2025 wraps up—altcoin season may yet be on the horizon.
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