How will the altcoin market in 2025 be different from 2021?

Author: Route 2 FI Source: X, @Route2FI Translation: Shan Ouba, Golden Finance

The new feature of this cycle is that we have experienced several small altcoin seasons, and most tokens, including those in the old cycle, have experienced increases. Here are several key time periods:

• January to March 2023

• October 2023 to March 2024

• September to December 2024

In addition, the market has experienced multiple narrative rotations, from gambling coins and Telegram robots in the summer of 2023 to AI agents and DeFAI, which became popular in the fourth quarter of last year.

Many people are still expecting a massive altcoin season like the one in 2021 (there were two that year). But this is not 2021, and the biggest difference is that now we probably have close to 1,000 new altcoins (the larger ones with some kind of roadmap), which was not the case four years ago.

Diversification and Decentralization Challenges

The strategy of investing in altcoins has always been to hope for higher returns than Bitcoin, and then convert those gains into BTC or USD. But now the question is: Which altcoins should you buy?

The market is so fragmented now that it is easy to pick the "wrong altcoins", the ones that will not rise, while your friends are making crazy money.

Another feature of this cycle is the "trench" strategy. While there has been on-chain activity in 2021, it is nothing like the Solana trenches of today. Earlier, you could just log in to Binance and buy almost any token, and the play was simple: you saw Hsaka post a few “hot words” and you knew you should go long $SOL, then long $AVAX.

However, with the explosion of $PEPE in April 2023, the rules of the game changed. Since then, memecoins have gained huge attention, followed by $BITCOIN, $WIF, $POPCAT, $GOAT, and the list is incredibly long.

Narrative-driven vs. meta-cycle shift

The current environment has shifted from the past where most tokens rose in sync to narrative-driven meta-cycles (such as utility tokens, animal coins, AI tokens, etc.). The reason people complain about the altcoin season is that they are used to the strategy of hoarding spot, which is what the OGs used before 2017 and 2021. So does this strategy still work this time? Obviously not for all tokens.

I would even say that those who dominated in 2017 and 2021, who did not transition from perpetual contracts on centralized exchanges, no longer have a real advantage when they enter the market in 2024 against memecoin and AI coin players in the Solana trenches.

The fragmentation of the market is real (too many new tokens are issued). Strategies that worked in the last round, no longer work now. The buy and hold strategy only works for certain assets (such as BTC and SOL), which forces people to do more rotation operations.

If you are a trader who is willing to operate in both CEX and on-chain markets, this new environment should not be too worrying for you. As long as there is still volatility in the market, there will always be opportunities.

My advice is, don't think that "going long" is your only option. When you feel uncertain, you can also hedge, earn funding rate income, go short, and even hedge.

Future of Altcoins

Have we peaked yet? For Bitcoin, probably not yet. But I am pretty sure that many altcoins have peaked and will not reach their all-time highs (ATH) again. Of course, this does not mean that there will not be several altcoin rallies in 2025. But in the long run, there will not be enough buyers to offset the large unlocked token supply.

You see, Reflexivity works both ways. Just like a ball thrown into the air, it will eventually fall back to the ground.