Investors advised caution monitoring leverage and market dominance for guidance.
Last week marked a notable period of activity in the cryptocurrency market. Although Bitcoin (BTC) $117,555 experienced only a limited decline, other major cryptocurrencies saw sharper drops in their values. Leading digital assets that recently showed upward trends, such as XRP, DOGE, and Solana $187 (SOL), fell by approximately 5% within the past 24 hours.
ContentsRapid Decline in AltcoinsIs the Altcoin Season Over?Leveraged Trading and Market Health Rapid Decline in Altcoins
Expectations for a recovery in the crypto market were shaken by severe weekly losses in major altcoins. Data from various platforms highlighted that from their peaks on Wednesday, XRP and DOGE dropped by around 18%, while SOL saw a 12% decline. The CoinDesk 80 Index, which tracks mid-sized coins, fell 10% from its weekly highest point. Meanwhile, Bitcoin retreated from the week’s peak of 120,000 dollars to 116,000 dollars, marking a 3% decrease.
Ether (ETH), Ethereum $3,753’s cryptocurrency, is trading 4% below its weekly peak. This relative stability in ETH’s price is attributed to steady accumulation in the wallets of crypto strategy firms. Crypto Traders Are Rushing to This App – Here’s Why You Should Too
Is the Altcoin Season Over?
In recent weeks, substantial capital flow towards smaller tokens had sparked discussions of an ‘altcoin season.’ Market analysts define ‘altcoin season’ as periods where relatively risky and smaller projects outshine leading digital assets.
CoinGlass’ Altcoin Season Index dropped from 59 at the beginning of the week to 41 on Friday. This decrease follows the brief speculative surge seen in the crypto markets in January and suggests a testing of the strength of the altcoin season.
Leveraged Trading and Market Health
Coinbase’s Head of Research, David Duong, emphasized in a report that the total altcoin market has nearly doubled since April. However, the pullback this week was attributed to an increase in leverage usage in altcoin derivatives trading. The report noted:
“Excessive use of leverage by investors led to rapid depreciation in the altcoin market.” – David Duong, Coinbase Research
The Altcoin Open Position Dominance indicator also rose to 1.6, previously indicating market upheavals. The indicator suggests that a reduction in leverage ratios could result in a healthier balancing of the altcoin market.
Additionally, the ‘Bitcoin Dominance’ rate, which reflects Bitcoin’s share of the total cryptocurrency market, is being closely monitored. This ratio dipped below the 200-day moving average for the first time in January 2025 and has done so again recently. David Duong remarked:
“A sustained move below the 200-day average could be a significant sign of an altcoin season gaining strength.” – David Duong, Coinbase Research
However, Duong cautioned investors to be more prudent, suggesting it would be safer to wait for varied closures before taking positions.
Current developments suggest ongoing short-term volatility and risks in the crypto market. High-leverage transactions and volume fluctuations play significant roles in market dynamics. Whether the altcoin season will persist is dependent on Bitcoin’s market dominance and investors’ risk appetites. Hence, investors engaging in the crypto market are advised to closely monitor current indexes and indicators, and to exercise caution with leverage and other risk-enhancing factors.
You can follow our news on Telegram, Facebook, Twitter & Coinmarketcap Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
