Is the alt season over? Bitcoin ETFs will rewrite cryptocurrency investment strategies

Bitcoin exchange-traded products may have fundamentally changed the concept of cryptocurrency “alt season.”

For years, the cryptocurrency market has followed a familiar rhythm, an almost predictable dance of capital rotation.

However, this once-taken-for-granted cycle is showing signs of structural breakdown.

Spot Bitcoin exchange-traded funds (ETFs) broke records, seeing $129 billion in capital inflows in 2024. This has provided retail and institutional investors with unprecedented access to Bitcoin, but has also created a vacuum that has sucked capital out of speculative assets. Institutional players now have a safe, regulated way to gain exposure to cryptocurrencies without the risk of the altcoin market. Many retail investors also find ETFs more attractive than the dangerous chase for the next 100x coin. Prominent Bitcoin analyst Plan B even traded his actual BTC for spot ETFs.

This shift is happening in real time, and if capital remains locked up in structured products, altcoins will face a reduction in their share of market liquidity and relevance.

Is the altcoin season over? The rise of structured crypto investing

Bitcoin ETFs offer an alternative to chasing high-risk, low-market-cap assets, as investors can gain leverage, liquidity, and regulatory clarity through structured products. Retail investors, once the primary drivers of altcoin speculation, can now directly access Bitcoin and Ethereum.

Institutional investors have greater incentives to avoid altcoin risk. Hedge funds and professional trading desks that once chased higher returns from less liquid altcoins can now deploy leverage through derivatives or invest through ETFs on traditional financial rails.

With the ability to hedge through options and futures, the incentive to bet on illiquid, low-volume altcoins has been greatly reduced. This was further confirmed by the record $2.4 billion in outflows and arbitrage opportunities created by ETF redemptions in February, forcing unprecedented discipline in the cryptocurrency market.

The traditional “cycle” starts with Bitcoin and then moves into the altcoin season. Source: Cointelegraph Research

Will VCs abandon cryptocurrency startups?

Venture capital (VC) firms have historically been the lifeblood of round season, injecting liquidity into emerging projects and crafting grand narratives around emerging tokens.

However, with leverage easily accessible and capital efficiency a top priority, venture capital firms are rethinking their approach.

Venture capital firms seek to achieve as much return on investment (ROI) as possible, but the typical range is between 17% and 25%. In traditional finance, the risk-free capital rate is the benchmark against which all investments are measured, usually expressed as the yield on U.S. Treasury bonds.

In the cryptocurrency space, Bitcoin’s historical growth rate serves as a similar benchmark for expected returns. This effectively becomes the industry’s version of a risk-free rate. Over the past decade, Bitcoin’s 10-year compound annual growth rate (CAGR) has averaged 77%, far outpacing traditional assets like gold (8%) and the S&P 500 (11%). Even over the past five years, both in bull and bear markets, Bitcoin has maintained a 67% CAGR.

Using this as a benchmark, a venture capitalist who invested in Bitcoin or Bitcoin-related businesses at this growth rate would have received a total return on investment of approximately 1,199% over five years, which would mean an investment that would have increased nearly 12 times.

Although Bitcoin remains volatile, its long-term outperformance makes it a fundamental benchmark for evaluating risk-adjusted returns in the crypto space. With arbitrage opportunities and reduced risk, venture capital firms may make safer choices.

The number of venture capital deals fell 46% in 2024, despite a rebound in overall investment dollars in the fourth quarter, suggesting a shift in investment toward more selective, higher-value projects rather than speculative financings.

Web3 and AI-driven crypto startups remain compelling, but the days of indiscriminate funding for every token with a whitepaper may be numbered. If venture capital further shifts toward structured investments through ETFs rather than investing directly in risky startups, the consequences for new altcoin projects could be severe.

Meanwhile, the few altcoin projects that have made it onto institutional radars — such as Aptos, which recently filed for an ETF — are the exception rather than the norm. Even crypto index ETFs designed to capture broader investment opportunities have struggled to attract meaningful inflows, highlighting that capital is concentrated rather than dispersed.

Oversupply issues and new market realities

The landscape has changed. The sheer number of altcoins vying for attention has created a saturation problem. According to Dune Analytics, there are currently over 40 million tokens on the market. An average of 1.2 million new tokens were issued each month in 2024, and over 5 million tokens have been created since the beginning of 2025.

Liquidity is not flowing to altcoins as it once did due to institutions’ preference for structured exposure and the lack of retail-driven speculative demand.

This presents a harsh truth: most altcoins will not survive. CryptoQuant CEO Ki Young Ju recently warned that without a fundamental shift in market structure, most of these assets are unlikely to survive. “The era of everything going up is over,” Ju said in a recent X post.

In an era where capital is locked up in ETFs and perpetual contracts rather than flowing freely into speculative assets, the traditional strategy of waiting for Bitcoin’s dominance to wane before turning to altcoins may no longer apply.

The cryptocurrency market is not what it used to be. The era of easy, cyclical altcoin rallies may be replaced by an ecosystem where capital efficiency, structured financial products, and regulatory clarity determine where money flows. ETFs are changing the way people invest in Bitcoin and fundamentally altering the distribution of liquidity across the market.

For those who have built on the assumption that every Bitcoin rally will be followed by an altcoin boom, it may be time to reconsider. As the market matures, the rules may have changed.