According to recent market data and analysis, the relationship between Bitcoin (BTC) price movements and the valuation of altcoins presents a complex and multi-layered dynamic, mainly reflected in the following aspects:

The Inverse Relationship Between Bitcoin Dominance and Altcoins

1. Rising Dominance Suppresses Altcoin Performance

Bitcoin's market dominance (BTC.D) continued to rise in 2025, briefly exceeding 60%, reaching a new high since 2020. This strong performance led to a concentration of capital from altcoins to BTC, especially when macroeconomic uncertainties (e.g., tariff policies, geopolitical risks) intensified, investors preferred the safe-haven asset BTC over high-volatility altcoins.

In April 2025, BTC dominance rose to 58.3%; during the same period, prices of mainstream altcoins like ETH and BNB significantly declined, with some tokens dropping more than 20%.

2. Capital Rotation Patterns in Historical Cycles

When Bitcoin's dominance breaks through key thresholds (e.g., 60%), it may trigger a phase of rebound for altcoins. For example, VanEck's research shows that when the altcoin season index exceeds 60, BTC may rise by 73% within six months, after which funds may flow into the altcoin market. However, current on-chain data (e.g., decreasing active addresses, declining stablecoin market cap) indicates that altcoins still face high risks in the short term and need to wait for a clear BTC trend.

The Transmission Mechanism of BTC Price Fluctuations to Altcoins

1. BTC Consolidation Period: Shrinking Altcoin Liquidity

When BTC consolidates at key price levels (e.g., the $83,000-$95,000 range), overall market liquidity contracts, and altcoins generally experience a decrease in valuation due to the lack of independent narratives and funding support.

In April 2025, BTC trading volume decreased by 45%, while the total market capitalization of altcoins fell from $1 trillion to $600 billion, a decline of 40%.

2. Differential Effects After BTC Breaks Resistance

Short-term Driving Effect: If BTC breaks through a key resistance level ($95,000), it may briefly boost market sentiment, driving rebounds in some altcoins (e.g., Solana, Meme coins).

Trump's policies pushed SOL prices back to $150, but subsequently, due to the recovery of BTC dominance, altcoins retreated by more than 10%.

Long-term Siphoning Effect: Continued increases in BTC (e.g., the $200,000 target predicted by Arthur Hayes) may attract more capital inflow, squeezing the space for altcoins.

Standard Chartered pointed out that after BTC decoupled from tech stocks, its safe-haven attributes may further weaken the appeal of altcoins.

The Impact of On-chain Data and Market Sentiment

1. On-chain Activity Comparison

The number of active addresses on BTC decreased by only 26%, while ETH and SOL decreased by 41% and 59%, respectively, reflecting a significant drop in altcoin user participation, weakening their valuation foundation. Moreover, BTC’s MVRV-ZScore (1.6) is nearing the bottom range, indicating that its price is relatively 'undervalued', while altcoin MVRVs are generally in a loss state, exacerbating selling pressure.

2. Derivative Market Signals

The BTC futures long-short ratio (1.9) indicates retail investor sentiment is greedy, while the futures open interest for altcoins continues to decline, suggesting that major funds are withdrawing. Historical data shows that when the BTC long-short ratio exceeds 2.0, the probability of a market correction increases, which may further lead to a decline in altcoins.

The Combined Effect of Macroeconomic and Policy Factors

1. Interest Rate and Liquidity Expectations

Expectations for Fed Rate Cuts (61.8% probability by June 2025) may improve liquidity for risk assets, but BTC, due to its 'digital gold' attributes, benefits more, while altcoins rely on higher market risk appetite.

2. Regulatory and Market Structure Changes

After the implementation of the European MiCA regulations, the compliance process has accelerated, with BTC further consolidating its position as the preferred asset for institutions, while altcoins face stricter scrutiny (e.g., the Libra scam incident), intensifying market differentiation.

Future Outlook and Strategic Recommendations

1. Short-term Strategies:

Pay attention to changes in BTC dominance; if it breaks through 65%, be wary of further downside risks for altcoins.

Utilize BTC/ETH trading pairs to go long on BTC and short on altcoins to capture relative strength differences.

2. Medium to Long-term Opportunities:

- If BTC enters a stable upward cycle (e.g., breaking through $100,000), one can gradually invest in high-potential sectors (e.g., AI, RWA-related tokens).

- Closely monitor on-chain indicators such as altcoin social volume and developer activity to capture sentiment turning points.

Summary

The price movements of Bitcoin profoundly influence the valuation of altcoins through multiple channels such as dominance, capital flow, on-chain activity, and macro policies. In the current market environment, BTC's safe-haven attributes and institutional preferences make it a 'safe haven' for funds, while altcoins need to wait for a clearer BTC trend or new narratives (e.g., AI, payment ecosystems) to see systematic rebounds. Investors should dynamically balance the allocations of both to avoid reliance on historical cycle experiences.