A $1.2 trillion transition towards Bitcoin could be underway, while one concerning index suggests altcoins may not recover.

Bitcoin is once again solidifying its position in the cryptocurrency market, and the data supporting this trend clarifies why a wide array of altcoins is unlikely to surpass the leading cryptocurrency.

Information from CoinMarketCap reveals that Bitcoin’s dominance is rising, approaching 60% of the overall cryptocurrency market capitalization. In contrast, the dominance of altcoins has been declining throughout the current market cycle.

Simultaneously, the Altcoin Season Index stands at 41, indicating a market led by Bitcoin rather than a widespread rotation that typically boosts most tokens at once. The figures have remained below the 75-plus threshold that usually indicates a broad-based shift into smaller assets since last September.

This suggests that while retail traders are inclined to reinvest Bitcoin profits into speculative tokens, they are facing a bear market that has not provided any asset the chance to excel.

Consequently, there has been minimal attention on altcoins. Instead, the market has been defined by a different cycle where today’s marginal buyers are not investing in lesser-known tokens, as they are primarily focused on Bitcoin’s distinct attributes.

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Jan 30, 2026 · Gino Matos

Institutional flows favor liquidity and safety

The most notable transformation in cryptocurrency since the last classic altcoin season is the swift expansion of regulated infrastructure and institutional access points.

Bitcoin now benefits from mainstream distribution channels, such as spot exchange-traded funds and institutional custody solutions, tailored for large investors. These investors prioritize high liquidity, low slippage, and protection from headline risks.

Large capital allocators seldom adopt a diversified strategy across numerous tokens. Instead, they acquire assets that pass their internal risk assessments.

This typically involves selecting the asset with the longest track record, the highest liquidity, and the most transparent market positioning.

Even when institutional investors aim to gain exposure to the wider cryptocurrency market, they generally start with Bitcoin and expand their holdings later.

Recent fund flow data demonstrates a strong preference for quality over speculative altcoins.

As reported by CoinShares, cryptocurrency investment products experienced a fourth consecutive week of outflows, totaling $3.74 billion over four weeks, including $173 million in the most recent week.

Bitcoin and Ethereum were the main sources of these redemptions, with losses of $133 million and $85.1 million, respectively.

At the same time, a few major alternative tokens saw inflows, with XRP gaining $33.4 million and Solana adding $31 million.

This selective flow indicates that investors are not pursuing a broad altcoin rally. They are opting for a few liquid assets while remaining highly cautious.

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A historic imbalance in supply and demand

Altcoins are encountering significant challenges due to an unprecedented mix of intense selling pressure and considerable token dilution.

Data from CryptoQuant indicates that the cumulative buy-and-sell difference for altcoins (excluding Bitcoin and Ethereum) is at -$209 billion over the 13 months since January 2025. The last time demand equaled supply was nearly zero in early 2025.

Altcoins Sell Pressure (Source: CryptoQuant)

Since then, the market has moved strictly in one direction. This extended net selling on centralized exchange spot markets signifies a complete lack of institutional accumulation for smaller tokens.

The -$209 billion figure does not necessarily indicate a market bottom. Instead, it simply means that buyers have disappeared.

A significant factor contributing to this decline is the sheer number of new assets.

A report from crypto wallet manufacturer Tangem revealed that over 120 million unique tokens had been created as of February 2025, compared to fewer than 500 tokens a decade earlier.

This illustrates that an excessive number of tokens are competing for a market share that has not fundamentally expanded. The dynamics render any potential recovery highly precarious and jeopardize the survival of low-cap tokens.

Furthermore, some of these assets consistently schedule token unlocks, exacerbating this issue.

Token unlocks introduce new supply on fixed dates, irrespective of market sentiment. In fact, a Keyrock study indicates that 90% of these events apply negative price pressure, with declines often commencing approximately 30 days prior to the scheduled release.

Bitcoin has no planned dilution, making it a more straightforward hold for investors looking to avoid impending supply overhangs over a one-year timeframe.

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Trading volumes signal a flight to quality in this bear market

Market analysts have observed that the cryptocurrency sector is currently in a bear market, which has driven Bitcoin’s price into a range between $65,000 and $72,000.

During significant corrections or the latter stages of bear markets, investors typically shift their capital toward the leading digital asset while moving away from altcoins.

Data from CryptoQuant indicates that this behavior is reflected in trading volumes on Binance, the largest exchange in the market.

Bitcoin Trading Volume Rises (Source: CryptoQuant)

As Bitcoin climbed back above $60,000, a significant shift in the distribution of trading volume was observed.

On Feb. 7, Bitcoin trading volume on Binance regained its dominance, accounting for 36.8% of total exchange volume. In contrast, altcoins made up 35.3% of the volume, while Ethereum represented 27.8%.

This data indicates that altcoin trading activity has experienced the most significant decline during this downturn.

In November, altcoins comprised 59.2% of Binance’s trading volume. By Feb. 13, their share had decreased to 33.6%, reflecting an almost 50% reduction in activity.

This trend of capital flight has been observed repeatedly during previous corrective phases, particularly in April 2025, August 2024, and October 2022.

During times of heightened uncertainty and market stress, investors naturally gravitate toward Bitcoin.

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Altcoins trillion-dollar rotation to Bitcoin

Market analysts have indicated that the timeline for the conclusion of the current bear market remains highly uncertain.

However, if historical trends hold, the next three to four months could see a substantial capital rotation from lesser-known tokens into BTC.

In this scenario, analysts at CEX.io estimate that between $740 billion and $1.2 trillion in trading volume could transition from altcoins to Bitcoin.

In a conservative estimate, Bitcoin’s volume share would rise by 5%-6%, increasing its total share to 46%. This assumes the overall market volume declines by 10% to 15%.

Conversely, a more optimistic scenario suggests an 8%-9% increase in Bitcoin’s volume share, elevating it to 49% and resulting in a $1.2 trillion rotation.

This is due to current market conditions closely resembling those of the 2022 bear market, when Bitcoin’s volume share increased by 13.5% over four months. Notably, a similar 13.6% rise occurred in mid-2018.

Bitcoin Share of Total Trading Volume in Bear Markets (Source: CEX.io)

CEX.io analysts informed CryptoSlate that while a complete 13.5% increase is less likely now, given Bitcoin’s current volume dominance of 40%, there remains significant potential for further consolidation.

According to them:

“Typically, the larger the decline in overall crypto trading volume, the greater the gain in market share Bitcoin can achieve. For example, in 2022, total monthly volume fell by approximately 17% during the May-September period. Consequently, the current level of Bitcoin’s volume dominance (40%) is notably higher than in 2018 and 2022, suggesting that rotation has already commenced. However, it remains well below the 42-46% peaks observed during intense rotation phases, indicating considerable room for further consolidation.”

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