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The altcoin market is currently undergoing one of its most significant depreciations amid widespread selling pressure, with liquidity concentrated on a limited number of trading pairs.
According to a recent report from Glassnode, weak adoption and product-market alignment have exacerbated these challenges. This has resulted in widespread losses across all altcoin subsectors, and in recent weeks, altcoins have notably lagged behind Bitcoin (BTC).
Principal Component Analysis (PCA) has indicated that most ERC-20 tokens display highly correlated price movements. This suggests a sector-wide sell-off with minimal differentiation among assets.
Data from Artemis confirmed that the average market performance since the February 2 crash has been a negative 3.4%, compared to Bitcoin’s 1.5% decline during the same timeframe. Furthermore, only 5 out of the 21 altcoin sectors monitored by Artemis showed better average performances than Bitcoin.
The report pointed out that the altcoin market capitalization has decreased by $234 billion over the last two weeks, with only a few historical instances recording larger absolute declines.
This significant loss reinforces the perception of a bear market within the altcoin sector, contrasting with Bitcoin’s relative stability. In percentage terms, the current drawdown ranks among the largest in altcoin history, with only 41 out of 1,662 trading days witnessing a more severe drop.
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However, the latest drawdown remains less severe than the Great Miner Migration in May 2021 and the TerraLUNA collapse in 2022.
Liquidity concentration in altcoins
Despite recent improvements in sentiment following the US elections and an increase in altcoin exchange-traded fund (ETF) applications, liquidity remains highly concentrated.
A recent report from Kaiko noted that daily altcoin liquidity — assessed by the 1% market depth of the top 50 tokens — has nearly doubled since September, reaching $960 million.
However, the top 10 altcoins by market capitalization now represent 64% of total market depth, while mid-cap tokens (ranked 20–30) have seen their share diminish.
Interestingly, smaller-cap altcoins (top 50) have gained traction, surpassing larger market-cap groups (top 40) in liquidity share. This trend indicates that while liquidity is recovering, it is consolidating at the top, leaving many altcoins vulnerable.
With Bitcoin demonstrating strength relative to altcoins, a clear divergence is emerging within the digital asset market, raising concerns about the long-term sustainability of numerous altcoin projects.
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