Bitcoin ETF Reshapes the Crypto Market Ecosystem: Traditional "Altcoin Season" May Disappear

The emergence of Bitcoin spot exchange traded funds (ETFs) may fundamentally change the long-standing concept of "alts season" in the crypto market.

For many years, the crypto market has followed a predictable pattern of capital rotation. The rise in Bitcoin prices attracts mainstream attention and capital inflow, after which funds turn to alts. Speculative capital floods into small-cap assets, driving up their value, and traders excitedly refer to it as "altcoin season."

However, this cycle, which was once taken for granted, is showing signs of structural collapse.

In 2024, the spot Bitcoin ETF attracted a record inflow of $129 billion. This provided retail and institutional investors with an unprecedented channel for Bitcoin investment, but also created a funding vacuum that siphoned off capital that could have gone to speculative assets. Institutional investors can now participate in cryptocurrency investment in a secure and regulated manner, without bearing the high risks of the altcoin market. Many retail investors also find that ETFs are more attractive than searching for the next skyrocketing token.

This transformation is happening in real time, and if funds continue to be locked in structured products, altcoins will face a situation of reduced market liquidity and lower correlation.

The Rise of Structured Encryption Investments

The Bitcoin ETF provides another option for investors seeking high-risk, low-market-cap assets. Investors can now gain leverage, liquidity, and regulatory transparency through structured products. Retail investors, who once fueled speculation in alts, can now invest directly in Bitcoin and Ethereum ETFs. These tools eliminate concerns about self-custody, reduce counterparty risk, and align with traditional investment frameworks.

Institutional investors tend to avoid the risks of altcoins. In the past, hedge funds and professional trading platforms chased high returns in low liquidity altcoins, but now they can deploy leverage through derivatives or gain exposure on traditional financial tracks through ETFs.

As the ability to hedge through options and futures has strengthened, the motivation to speculate on illiquid, low-volume alts has significantly weakened. The record $2.4 billion outflow of funds in February and the arbitrage opportunities brought about by ETF redemptions have further reinforced this trend, pushing the crypto market into an unprecedented phase of discipline.

The Shift in Venture Capital Strategies

Venture capital (VC) firms have long been important supporters of altcoin seasons, injecting liquidity into emerging projects and building grand narratives for new tokens. However, as leverage becomes more accessible, capital efficiency has become a key priority, and VCs are reevaluating their strategies.

In the crypto market, the historical growth rate of Bitcoin has become the benchmark for expected returns. Over the past decade, the Compound Annual Growth Rate (CAGR) of Bitcoin averaged 77%, far surpassing traditional assets like gold (8%) and the S&P 500 index (11%). Even during the bull and bear markets of the past five years, Bitcoin's CAGR has remained at 67%.

Based on this, if venture capitalists deploy capital in Bitcoin or related enterprises at this growth rate, the total investment return over five years will be approximately 1,199%, meaning the investment will increase nearly 12 times.

Although Bitcoin is still volatile, its long-term excellent performance makes it a benchmark for assessing risk-adjusted returns in the encryption space. As arbitrage opportunities increase and risks decrease, VCs may opt for safer investment directions.

In 2024, the number of VC transactions decreased by 46%, although overall investment volume rebounded in the fourth quarter. This marks a shift towards more selective, high-value projects rather than widespread speculative funding.

Web3 and AI-driven crypto startups continue to attract attention, but the era of indiscriminate funding for every token with a white paper may be over. If venture capital further shifts towards structured investments through ETFs rather than direct investments in high-risk startups, new altcoin projects may face serious consequences.

Oversupply and New Market Realities

The market landscape has changed significantly. The sheer number of altcoins vying for attention has led to a severe saturation problem. Data shows that there are currently over 40 million tokens in the market. An average of 1.2 million new tokens are launched each month in 2024, and more than 5 million tokens have been created since the beginning of 2025.

As institutions lean towards structured investments and the lack of retail-driven speculative demand, liquidity is no longer flooding into alts like it used to. This reveals a harsh reality: most alts will struggle to survive.

In an era where funds are locked in ETFs and perpetual contracts rather than freely flowing into speculative assets, the traditional strategy of waiting for Bitcoin's dominance to weaken before turning to alts may no longer be applicable.

The crypto market is no longer what it used to be. The era of easy, cyclical alts surges may be replaced by an ecosystem where capital efficiency, structured financial products, and regulatory transparency dictate the flow of funds. ETFs are changing the way people invest in Bitcoin and fundamentally altering the liquidity distribution of the entire market.

For investors accustomed to the altcoin boom that follows every Bitcoin rise, it may be time to rethink strategies. With the maturation of the market, the rules of the game may have fundamentally changed.