Limited tradable supply and a U.S. liquidity crunch drive crypto losses; patience may pay off as macro conditions improve.
The crypto market is going through one of its toughest phases in months. While Bitcoin has managed to hold up relatively well, most altcoins have taken a sharp hit, leaving traders wondering why altcoins are crashing so hard right now.
Crypto analyst Michaël van de Poppe explains that one major reason behind the steep fall is the limited tradable supply.
He points out that if only about 10% of an altcoin’s total supply is available for trading, any large sell order can shake up the market. For example, if someone decides to sell just 2% of the total supply, it can cause a big drop because the order books can’t absorb that much selling pressure, especially in a market where most traders have already been liquidated in recent weeks.
This thin liquidity makes altcoins more volatile; prices fall harder during downturns, but can also surge faster when sentiment flips bullish again.
“If you’re holding altcoins, be patient,” van de Poppe says. “The cycle hasn’t peaked yet.”
Another key factor behind the altcoin weakness is Bitcoin dominance, the percentage of total crypto market value held by Bitcoin.
Bitcoin dominance recently broke out of an ascending channel, showing that money is flowing out of altcoins and into Bitcoin. If BTC dominance breaks below 60.5%, it could ease some selling pressure on altcoins. But if it keeps rising, altcoins may continue to struggle.
Van de Poppe also compared today’s situation to late 2019, when Bitcoin was strong but altcoins kept falling for months until macro conditions improved and sentiment flipped, sparking a powerful altcoin rally.
Adding to the pressure, the U.S. government shutdown is creating a liquidity squeeze across financial markets, including crypto.
With Treasury spending on hold, about $1 trillion has built up in the Treasury General Account (TGA), draining reserves from the system and tightening liquidity. That’s pushing money market rates higher and pulling funds out of riskier assets like crypto.
At the same time, Federal Reserve Chair Jerome Powell’s cautious comments about rate cuts have made investors more defensive. Bitcoin dropped below $108,000, and altcoins followed suit as trading volumes fell 20-40% since mid-October.
Despite the gloomy picture, there’s still room for optimism. Historically, every time Bitcoin dominance peaks and altcoins lag, a strong comeback follows once liquidity improves and market confidence returns.
If the U.S. government resolves its shutdown soon, delayed economic data could start showing weakness, possibly pushing the Fed to turn more dovish. That could lead to a liquidity boost or even new quantitative easing (QE) measures in 2026, setting the stage for the next big crypto rally.
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