According to recent market data and analysis, the trend of Bitcoin (BTC) has a complex and multi-layered dynamic relationship with the valuation of altcoins, primarily reflected in the following aspects:
The inverse relationship between Bitcoin's dominance and altcoins
1. Rising dominance suppresses altcoin performance: Bitcoin's market dominance (BTC.D) continued to rise in 2025, briefly breaking through 60%, reaching the highest level since 2020. This strong performance led to capital concentration from altcoins to BTC, especially when macroeconomic uncertainties (such as tariff policies and geopolitical risks) intensified, investors tended to prefer the safe-haven asset BTC over the highly volatile altcoins. In April 2025, BTC's dominance rose to 58.3%, while major altcoins like ETH and BNB saw significant price drops, with some tokens falling by over 20%.
2. Capital rotation patterns in historical cycles: When Bitcoin's dominance breaks through key thresholds (such as 60%), it may trigger a phase 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 capital may flow into the altcoin market. However, current on-chain data (such as declining active addresses and stablecoin market capitalization) indicates that altcoins still face high risks in the short term and must wait for a clear BTC trend.
The transmission mechanism of BTC price fluctuations to altcoins
1. BTC consolidation period: Altcoin liquidity shrinks. When BTC consolidates at critical price levels (such as the $83,000-$95,000 range), overall market liquidity contracts, and altcoins, lacking independent narratives and funding support, generally see their valuations shrink. In April 2025, BTC trading volume fell by 45%, while the total market capitalization of altcoins dropped from $1 trillion to $600 billion, a decline of 40%.
2. Differentiation effect after BTC breaks resistance: Short-term driving effect: If BTC breaks through a key resistance level ($95,000), it may temporarily boost market sentiment, driving some altcoins (such as Solana and meme coins) to rebound. Trump's policies pushed SOL's price up to $150, but subsequently, due to the rise in BTC's dominance, altcoins retraced by over 10%. Long-term siphoning effect: A continued rise in BTC (such as Arthur Hayes' predicted target of $200,000) may attract more funds, squeezing space for altcoins. Standard Chartered noted that after BTC decoupled from tech stocks, its hedging properties could further weaken the attractiveness of altcoins.
The influence of on-chain data and market sentiment
1. On-chain activity comparison: The on-chain active addresses of BTC have only decreased by 26%, while ETH and SOL have decreased by 41% and 59% respectively, reflecting a significant decline in participation from altcoin users, weakening their valuation foundation. Additionally, BTC's MVRV-ZScore (1.6) is near the bottom range, indicating its price is relatively 'undervalued', while the MVRV of altcoins is generally in a loss state, exacerbating selling pressure.
2. Derivatives market signals: The BTC futures long-short ratio (1.9) indicates that retail sentiment is greedy, while the open interest in altcoin futures continues to decline, indicating that major funds are withdrawing. Historical data shows that when the BTC long-short ratio exceeds 2.0, the probability of market correction increases, which may lead to further declines in altcoins.
The combined effects of macroeconomic and policy factors
1. Interest rates and liquidity expectations: The Federal Reserve's interest rate cut expectations (61.8% probability in June 2025) may improve liquidity for risk assets, but BTC benefits more due to its 'digital gold' properties, while altcoins depend on higher market risk appetite.
2. Regulatory and market structure changes: After the implementation of the European MiCA regulations, the compliance process has accelerated, further solidifying BTC's position as the preferred asset for institutions, while altcoins face stricter scrutiny (such as the Libra scam incident), exacerbating market differentiation.
Future outlook and strategy recommendations
1. Short-term strategy: Pay attention to changes in BTC dominance. If it breaks through 65%, be wary of further downside risk for altcoins. Use BTC/ETH and other trading pairs to go long on BTC and short on altcoins, capturing relative strength differences.
2. Mid-to-long term opportunities: - If BTC enters a stable upward cycle (such as breaking through $100,000), gradually allocate to high-potential sectors (such as AI and RWA-related tokens). - Closely monitor altcoin social volume, developer activity, and other on-chain indicators to capture sentiment turning points.
Summary
The trend of Bitcoin profoundly influences 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 hedging properties and institutional preferences make it a 'safe haven' for funds, while altcoins need to wait for a clear BTC trend or new narratives (such as AI and payment ecosystems) to experience a systematic rebound. Investors need to dynamically balance allocations between the two, avoiding reliance on historical cycle experiences.
