- Altcoins Lag Behind While Bitcoin Rises
- Market Performance of Leading Altcoins Over the Last 12 Months
- Factors That Could Boost Altcoin Prices
- Trump’s Pro-Crypto Policy
- Expected Spot ETFs for Altcoins
- Economic Policies and Trade Tariffs
- Recession Fears in the U.S.
- Main Issue: Liquidity Shortage in the U.S.
- Three Main Causes of the Liquidity Shortage
- The Federal Reserve Is Implementing Quantitative Tightening (QT)
- Depletion of the Reverse Repo Facility
- Decline in the U.S. Treasury’s Balance
- The U.S. Debt Crisis: The Fed May Be Forced to Act
- When Will the Altcoin Rally Begin?
- Conclusion
Altcoins Lag Behind While Bitcoin Rises
After Donald Trump’s victory in the November 2024 presidential elections, the crypto market received significant political support. The new administration introduced a number of pro-crypto policies, resulting in a 21.93% increase in Bitcoin (BTC).
However, altcoins have failed to keep pace.
Market Performance of Leading Altcoins Over the Last 12 Months
- Ethereum (ETH) – down 53.8%
- Solana (SOL) – down 17.1%
- Cardano (ADA) – down 6.7%
- Dogecoin (DOGE) – down 1.6%
The question is: Why are altcoins lagging, and when will their next rally begin?
Factors That Could Boost Altcoin Prices
Several key events could help revive the altcoin market:
Trump’s Pro-Crypto Policy
Trump’s administration continues to implement regulations favorable to the crypto sector, which in the long term could support not only Bitcoin (BTC) but altcoins as well.
Expected Spot ETFs for Altcoins
Spot ETFs for Solana, XRP, and Litecoin (LTC) are expected to be approved soon, which could bring more institutional interest to these assets.
Economic Policies and Trade Tariffs
Trump’s recent tariff increases on China, Canada, and Mexico may impact global markets, which could also reflect on the crypto industry.
Recession Fears in the U.S.
After two consecutive quarters of negative GDP growth, financial markets are uncertain. In such times, investors avoid higher-risk assets like altcoins.
Main Issue: Liquidity Shortage in the U.S.
According to crypto analyst VirtualBacon, none of the above are the core reason for altcoins’ stagnation. Instead, he emphasizes that tight liquidity conditions in the U.S. are the real issue.
Three Main Causes of the Liquidity Shortage
The Federal Reserve Is Implementing Quantitative Tightening (QT)
The Fed is reducing its balance sheet instead of injecting money into the economy by selling assets or allowing bonds to mature without reinvestment. This means less free capital in the system.
Depletion of the Reverse Repo Facility
The Reverse Repo Facility, which previously provided liquidity to financial institutions, is nearly exhausted. This limits available cash in the market.
Decline in the U.S. Treasury’s Balance
The fewer funds in the government budget, the less the government can spend, further reducing available liquidity in the economy.
The U.S. Debt Crisis: The Fed May Be Forced to Act
According to VirtualBacon, in 2025 the U.S. will need to refinance massive government debt, but if liquidity remains low, there may not be enough bond buyers.
To avoid a financial crisis, the Federal Reserve may be forced to:
- End Quantitative Tightening (QT)
- Inject liquidity into banks
- Buy government bonds (Quantitative Easing – QE)
If these measures are implemented, altcoins are likely to enter a new bull cycle.
When Will the Altcoin Rally Begin?
VirtualBacon predicts that if the Fed doesn’t ease liquidity conditions by the end of the current quarter, the financial system will be under serious pressure.
- Once liquidity improves, we can expect a late altcoin cycle with potential for major gains.
- Despite the tough period, investors who position their portfolios properly could profit significantly when the market turns.
- While Bitcoin is in the spotlight, altcoins are patiently waiting for their moment.
Conclusion
Altcoins are currently lagging behind Bitcoin (BTC), but that could change with improved market liquidity.
Watch for Federal Reserve decisions, as they will determine when the next altcoin bull cycle will begin.
Frequently Asked Questions
Find answers to the most common questions below.
The main reason is the tightened liquidity in the U.S., which reduces the available capital for investing in riskier assets like altcoins.
The expected spot ETFs for Solana, XRP, and Litecoin, as well as possible economic stimulus from the Federal Reserve.
When the Fed tightens liquidity (QT), crypto assets suffer. When liquidity increases (QE), cryptocurrency prices generally rise.
Yes, but likely in a later stage of the current crypto cycle, once liquidity improves.
Ethereum (ETH), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), and other highly liquid projects with real-world use cases.
This article is for general informational purposes only and is not intended to be, nor should it be considered, legal or investment advice.
