Is Crypto Bull Run Over? What’s Holding Back the Altcoin Rally?

The political scenario in the US shifted in favour of the cryptocurrency industry when pro-crypto candidate Donald Trump emerged victorious in the US presidential election last November. As expected, the Trump administration has introduced several pro-crypto policies. The Bitcoin market has grown by at least 21.93% since November 5, 2024. However, it appears that the Altcoin market is yet to receive the benefit of this political shift.

The Altcoin market has surged by just 14% during the period. Notably, in the 12 months, Ethereum has declined by 53.8%, Solana by 17.1%, Cardano by 6.7% and Dogecoin by 1.6%. It is high time to analyse why Aitcoins are lagging and when they could rally. Ready? 

Elements Capable of Moving the Alt Market: The General Belief 

Firstly, the Trump administration’s pro-crypto stand is expected to support the altcoin market. The administration has recently introduced several pro-crypto policies. 

Secondly, the proposed Altcoin spot ETF launches are supposed to benefit the market. Solona, XRP and Litecoin spot ETFs are expected to be launched in the near future. 

Thirdly, Trump’s aggressive tariff policy has the potential to influence the market. The US president recently announced import tariffs on China, Canada and Mexico. 

Fourthly, rising recession fear has the capacity to affect the market. The US has seen two quarters of negative GDP growth under Biden.

However, in a series of posts on X, VirtualBacon dismisses all the arguments and asserts that none of them are the reason for the current stagnation in the Altcoin market. 

Experts Advise Focusing on the ‘Liquidity Element’

VirtualBacon argues that liquidity remains tight in the US market due to three major factors. 

Firstly, the expert points out that the Fed is still shrinking its balance sheet through Quantitative Tightening. 

During tough economic times, the US Fed prints money and buys assets like bonds to inject money into the economy. Now, they are doing the opposite. They are selling those assets or letting them mature without buying new ones, which takes money out of the system. 

Secondly, he notes that the Reverse Repo Facility is drained. 

This indicates that cash reserves that were available for the financial institutions to use, are now being used elsewhere. 

Thirdly, he pinpoints that the US Treasury’s general account is running low.

When the account is low, the government has less money to spend. This simply means less money circulating in the system. 

When Will Liquidity Return and Boost Altcoins?

Highlighting the US debt maturity issue, VirtualBacon argues that the Fed has no option but to intervene to reverse the liquidity scenario. 

A lot of US government debt is coming due in 2025. The government needs to refinance the debt, but there might not be enough buyers if liquidity remains tight. To make sure this debt gets bought, the Fed might have to step in and inject money into the market. 

• Also Read :
•   US Inflation Cools Faster Than Expected – What It Means for Fed Rate Cuts & Bitcoin
•   ,

If the Fed wants to avoid issues related to low reserves, they might also have to add money to the banks. 

The expert states that if the Fed does not add liquidity by this quarter, the financial system could become very stressed. 

VirtualBacon projects ending QT, injecting liquidity into banks and purchasing US treasuries as the three key ways by which the Fed could add liquidity to the US market.

In conclusion, Altcoins are not pumping yet because of tight liquidity, not because the bull run is over. Liquidity conditions should improve by this quarter, leading to a late-cycle Altcoin rally. While this phase is tough, those who position themselves well now could see major gains later.