Altcoins have dropped over 80%, but historical patterns suggest a bottoming phase.
Bitcoin dominance may precede a capital rotation into altcoins.
Utility tokens like Chainlink and Arbitrum are already showing early signs of strength.
After months of sharp declines, most altcoins have lost over 80% of their value from peak levels, prompting fears that the sector is in terminal decline. Yet according to leading crypto analyst Michael van de Poppe, this brutal correction may be less of an ending and more of a beginning. He argues that the current stagnation mirrors previous turning points in crypto history, suggesting that the altcoin market may be quietly preparing for its next major rally.
Unlike previous cycles, this downturn hasn't followed a familiar script. Van de Poppe points to similarities with late 2019 and early 2020, when altcoins reached their lows during periods of global economic uncertainty.
At that time, gold prices were climbing and investor confidence was low, much like today. In both historical cases, altcoins remained relatively flat for a while before experiencing a dramatic surge once broader market sentiment shifted.
One of the most telling indicators is Bitcoin dominance, which has surged significantly. It suggests that capital has rotated back into Bitcoin during the risk-off environment, a behavior that often precedes renewed interest in riskier, higher-beta altcoins.
Historically, once Bitcoin dominance peaks and starts to reverse, it sets the stage for capital to flow back into altcoins.
Despite a recent 40% surge in Ethereum against Bitcoin, most altcoins remain sluggish. This discrepancy points to a lack of confidence in the altcoin space. With investor sentiment still fragile, it doesn’t take much to push prices lower, and traders have largely avoided rotating profits into smaller tokens.
However, this may be a feature of a typical bottoming phase, where "smart money" quietly accumulates positions while retail traders stay on the sidelines. Low trading volumes and weak sentiment don’t necessarily indicate a dying market; they may instead signal a coiled spring waiting for the right trigger.
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Van de Poppe believes a few key events are needed to ignite the next altcoin rally:
1. Bitcoin needs to stabilize and break above $106,000, reaffirming broader market strength and risk appetite.
2. Ethereum must lead the charge, continuing its outperformance against Bitcoin and setting the tone for capital rotation into smaller-cap coins.
If these two assets lead, it would likely trigger liquidations of short positions and a rush of traders attempting to catch the next wave, resulting in a rapid revaluation of undervalued altcoins.
Despite the apparent stagnation, market indicators hint at an underlying shift:
The Altcoin Season Index recently dropped to its lowest level in over two years, a signal that historically marks the beginning of rotation back into altcoins.
Bitcoin's dominance is stretched, and Ethereum's share of the market has been quietly increasing, signaling that capital could soon begin flowing to altcoins.
Some altcoins are already showing strength. Infrastructure and utility-driven tokens, such as Chainlink, Aave, Arbitrum, and Optimism, continue to attract interest due to their real-world applications and steady protocol development.
In addition, the total market capitalization of altcoins (excluding Bitcoin and Ethereum) has been carving out a pattern of higher lows, a sign of early structural recovery that could precede a breakout.
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Despite these optimistic signals, several risks remain:
Macro headwinds such as interest rate volatility, inflation concerns, or geopolitical tensions could stall risk asset rallies.
Regulatory overhang remains a concern, particularly for small-cap tokens that lack clarity regarding their legal classification.
Overreliance on Bitcoin’s performance means that if BTC fails to hold key support levels, it could drag the entire market, including altcoins, down with it.
Nonetheless, the depth of the correction, combined with clear signals of quiet accumulation, makes the case for a pending reversal stronger than ever.
The altcoin market may appear lifeless on the surface, but beneath it lies a confluence of structural and sentiment indicators that point to a brewing shift. If Bitcoin breaks higher and Ethereum continues to lead, a broad altcoin rally could unfold faster than most expect.
For patient investors and sharp traders, now may be the time to prepare to stay the course. As has happened in past cycles, the quietest moments often come just before the loudest rallies. In crypto, momentum can return in an instant, and being positioned early is usually the key to outsized returns.