- Increasing token supply and declining liquidity create a market prone to manipulation and unexpected price movements.
- Understanding market cycles and recognizing shifting sentiment is crucial for making informed decisions and managing risks effectively.
In recent weeks, the crypto market has faced a challenging reality that many investors have found difficult to accept. The dreams of an explosive altcoin season are gradually receding, not because the possibility has been lost totally, but rather because the present market conditions cannot support it.
Imagine a casino where the number of players stays the same or declines yet the slot machines occupy an ever growing share. That’s the situation with altcoins. Every day, new projects are arising to produce a supply much beyond demand.
Right now, more than 36 million distinct tokens are competing for the interest of investors. If that wasn’t enough, over $25 billion in tokens will be unlocked between January and April, augmenting the deluge of supply saturating the market.
Crypto Market Manipulation Rises as Liquidity Drops
On the other hand, liquidity in the market is shrinking. Since December 2024, capital inflows into crypto have dropped by over 70%.
As liquidity decreases, the market becomes more and more easily manipulated. This is evident in the erratic price movements: false breakouts, momentary price spikes, and sudden trend reversals that seem designed only to trap unwary traders.
More worrying, however, is how the market is currently responding to news. In the past, announcements such as Donald Trump’s adoption of Bitcoin, the possibility of an ETF for Solana, Dogecoin, and XRP, and large investment funds buying Bitcoin would immediately push the price up. Now none of that seems to count. Negative news instead rapidly upsets the market.
Repeating Market Cycles in Crypto
If this pattern rings familiar, it’s no coincidence. A similar situation occurred at the end of the 2021 bull market, when Bitcoin peaked at $69,000. Back then, good news was ignored, while even a little negative sentiment was enough to send the market crashing.
On the other hand, at the end of the 2022 bear market, when FTX went bankrupt and many other crypto companies followed suit, the market did not fall any deeper. Bitcoin is holding steady at around $15,500, indicating that all the bad news was already priced in. Now, the same pattern is playing out, only this time we’re at the other end of the cycle.
Time to Take Profits
Crypto analyst Ali Martinez says 2025 is not the year to invest long-term, but rather to take profits. He has already sold 80% of his Bitcoin and has only made a few trades since mid-February.
His approach is today more of a wait-and-see one. He likens the situation to a lion in the savannah, patiently watching its prey, refraining from pouncing too soon, and only attacking when the best opportunity presents itself. With high volatility and increasing market traps, he says, it’s better to be selective than to act impulsively.
Market Reality Over Expectations
With more tokens in circulation and less money coming in, the risks of holding assets now could exceed the rewards. This doesn’t mean there’s no chance of Bitcoin or other altcoins going up, but it’s not as easy as it was at the start of a bull market cycle.
As has been seen in previous cycles, the best decision is not to follow expectations but to read the market reality carefully. If the current conditions truly are the end of the bull market, then only those who are able to see the signs will emerge victorious.
