The cryptocurrency market is currently enduring one of its toughest phases in months. While Bitcoin (BTC) has managed to maintain some stability, most altcoins are witnessing steep declines. Prices of major tokens such as Ethereum, Solana, and Cardano have dropped significantly, leaving traders and investors questioning why altcoins are crashing so hard right now.
Analysts point to a combination of factors — including limited tradable supply, rising Bitcoin dominance, and tightening U.S. liquidity — that are putting intense pressure on the broader market. Despite the pullback, experts believe this could be a temporary phase that sets up the next major recovery once macro conditions improve.
Limited Tradable Supply Exposes Market Weakness
Crypto analyst Michaël van de Poppe has highlighted one key reason behind the severe altcoin slump — limited tradable supply.
In simple terms, many altcoins have a large portion of their total supply locked up in staking, smart contracts, or long-term holding. Only a small percentage of tokens are actually available for trading on exchanges. Van de Poppe explains that if just 10% of an altcoin’s total supply is liquid, even a moderate sell order can trigger sharp declines.
For instance, if a large holder decides to sell just 2% of the total token supply, order books may struggle to absorb that amount in such a thin market. The result is a steep price drop, particularly when overall market liquidity is already low.
“Altcoins have become extremely volatile because of low liquidity,” said van de Poppe. “But volatility works both ways — when conditions improve, these assets tend to bounce back faster than Bitcoin.”
He adds that traders should stay patient, as historical cycles show that altcoins often lag behind Bitcoin before experiencing powerful rallies once sentiment shifts.
Bitcoin Dominance Continues to Rise
Another major factor driving the current weakness in altcoins is the steady rise in Bitcoin dominance — the metric that tracks Bitcoin’s share of the total crypto market capitalization.
Data shows that Bitcoin dominance has broken out of a months-long ascending channel, signaling that capital is flowing out of altcoins and back into Bitcoin. Investors tend to move toward BTC during uncertain times because it is considered the safest and most liquid crypto asset.
If Bitcoin dominance continues to climb above 60.5%, analysts expect further pressure on altcoins. However, if it drops below that level, some relief could return to smaller-cap tokens.
Van de Poppe compared the present situation to late 2019, when Bitcoin remained strong while altcoins suffered prolonged declines. Once macroeconomic conditions improved, however, the market witnessed a major altcoin rebound that outpaced Bitcoin’s gains.
U.S. Liquidity Crunch Deepens Market Pressure
Beyond crypto-specific dynamics, broader macroeconomic factors are also weighing heavily on the market — particularly the U.S. government shutdown and liquidity crunch.
The ongoing shutdown has frozen Treasury spending, causing nearly $1 trillion to accumulate in the Treasury General Account (TGA). This buildup is draining liquidity from the financial system and pushing up short-term interest rates. As a result, riskier assets such as cryptocurrencies are facing strong outflows.
Federal Reserve Chair Jerome Powell’s recent remarks about keeping rates higher for longer have added to the pressure. His cautious stance on monetary easing has discouraged speculative activity and triggered risk aversion across global markets.
Bitcoin fell below $108,000, while altcoins saw even deeper corrections. Trading volumes across major exchanges have dropped by 20–40% since mid-October, further amplifying the market’s fragility.
What Could Come Next for Altcoins?
Despite the widespread selling and negative sentiment, many analysts believe that the current correction could be setting up the next major altcoin rally.
Historically, altcoins tend to underperform when Bitcoin dominance rises, but once liquidity returns and investor confidence rebounds, the pendulum usually swings back in their favor.
If the U.S. government resolves its shutdown soon, delayed economic data could reveal underlying weakness in the economy, prompting the Federal Reserve to adopt a more dovish stance. Such a shift could restore liquidity to markets and reignite risk appetite.
Some analysts even suggest that a new round of quantitative easing (QE) in 2026 could serve as a powerful catalyst for both Bitcoin and altcoins. This potential liquidity injection might help the crypto market recover and possibly drive the next major bull phase.
The Bottom Line
The current crypto crash reflects a combination of limited supply liquidity, rising Bitcoin dominance, and a tightening macro environment. While these factors have created short-term pain, they also highlight how sensitive altcoins remain to liquidity cycles.
For long-term investors, patience remains key. Market cycles have shown that when liquidity improves and Bitcoin stabilizes, altcoins often deliver strong comebacks — sometimes exceeding prior highs.
As van de Poppe summed it up:
“If you’re holding altcoins, be patient. The cycle hasn’t peaked yet.”
When macro pressures ease and liquidity returns, the altcoin market could once again turn into one of the most profitable sectors in global finance.
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