Bitcoin Enthusiasts Are Letting Altcoins Pass by

Bitcoin, which is trying to settle above the psychologically important $100,000 level, gets the most media attention. Meanwhile, altcoins gained a strong upside momentum in recent weeks.

For example, ETH gained roughly 50% since early November. SOL moved higher by 35%, while XRP skyrocketed by more than 400%.

BTC dominance, which shows the share of Bitcoin in the total crypto market cap, has recently fallen below the 56% level after a brief attempt to settle above 59%. While some analysts believe that the true altcoin season starts when 75% of the top 50 coins perform better than BTC over the last three months, the loss of Bitcoin market share during Bitcoin’s rally is a clear sign of an altcoin season. What’s next?

The key drivers of the recent rally include Trump’s election victory and discussions about the possible inclusion of BTC into government reserves. It should be noted that Microsoft shareholders have recently voted against investment in Bitcoin, and it remains to be seen whether the U.S. government will ultimately adopt a Bitcoin strategy as there are many skeptics in the traditional financial system.

From a big-picture point of view, the strong growth in the altcoins space was driven by the influx of new money into the crypto market and the redistribution of speculative profits from the rally in BTC. Speculative traders, who have taken some profits off the table in Bitcoin, were searching for hot ideas and pushed the prices of altcoins higher.

The scenario that involves the robust growth of “second-tier” instruments after the strong growth of the leader is quite typical in financial markets. Talks about the potential inclusion of BTC in government reserves have nothing to do with altcoins, that will not be included in such reserves under almost any scenario. However, such discussions fuel general interest in crypto, which is bullish for altcoins.

The market’s expectations regarding new regulatory policy under Trump are extremely positive for altcoins. Both new and established projects in the altcoin space suffer from regulatory uncertainty and litigation risks, which have significantly increased under SEC’s current head Gensler.

The expected reduction in regulatory pressure fundamentally justifies the recent rally in altcoins. Unlike BTC, altcoins suffer from the pressure put by SEC regulations. It is widely expected that Paul Atkins, who was picked by Trump to head the agency, will be significantly better for crypto compared to Gensler.

While the changes in regulatory policy are more important for altcoins compared to Bitcoin, the dynamics of the world’s leading cryptocurrency will likely serve as the key catalyst that will determine whether altcoins enjoy stronger support in the near term. In case BTC manages to settle above the key $100,000 level, some of the new money that was waiting for a correction in BTC will give up their hopes and switch to altcoins, pushing their prices higher. As the market cap of an average altcoin is significantly lower than Bitcoins’ market cap, the inflow of new money can make a big difference.