The cryptocurrency market experienced a significant downturn, starting with a gradual decline over the weekend that accelerated sharply in the early hours of Monday. By morning, a massive sell-off had triggered liquidations, particularly for leveraged long positions in altcoins exceeding 5x multiples.
Like many others, I felt the impact of this drop. Although I had reduced some positions in advance, my substantial spot holdings still suffered losses. Compared to those facing leveraged liquidations, however, surviving the downturn intact is a relative victory.
The central question on everyone's mind is straightforward: Is the bull market over?
Current market sentiment is dominated by fear, with voices both optimistic and pessimistic. Bulls argue that the liquidation of leveraged positions has lightened the market, paving the way for a smoother upward trajectory. Bears counter that aside from Bitcoin, the rest of the market—including Ethereum—has already been in a bearish phase, with many altcoins hitting new lows repeatedly.
What Triggered the Sharp Decline?
To unpack the reasons behind this plunge, it's important to look beyond the crypto ecosystem itself. External macroeconomic factors played a decisive role.
- Tariff Policies: Market expectations had initially assumed that potential new tariffs would be used as a negotiating tool rather than implemented outright. However, recent developments suggest a more serious approach, including the potential use of special executive powers to impose economic sanctions or alter tariffs without congressional approval. This shift created uncertainty, and with U.S. markets closed over the weekend, cryptocurrencies reacted ahead of traditional equities, amplifying the panic.
- AI Sector Concerns: Advances in low-cost AI, such as those suggested by developments like DeepSeek, raised doubts about the continued demand for high-performance computing chips. This, in turn, affected leading tech stocks like NVIDIA. Given that U.S. equity indices are heavily reliant on a handful of tech giants, a stumble in this sector can have a ripple effect across risk assets, including cryptocurrencies.
- Interest Rate Expectations: The Federal Reserve’s recent decision to maintain current interest rates led some to anticipate fewer or even zero rate cuts in 2025. While this played a role in shaping market sentiment, it is likely less impactful than other factors. Broader monetary policy remains cautiously accommodative, and political pressure may yet influence future rate decisions.
In summary, this downturn resulted from a combination of factors, with unexpected events like new tariff threats and AI-related uncertainties serving as major catalysts.
Market Performance: A Closer Look
Bitcoin, which had recently reached new all-time highs, retraced approximately 16% from its peak in late January. The decline from Sunday to Monday alone was around 11%—a relatively standard correction within a bull market cycle.
The situation for altcoins, however, is more concerning. Ethereum fell nearly 38% from its recent high, and Solana retraced about 40% from its peak. Even larger altcoins listed on major exchanges like Binance have hit new lows, with some falling more than 60% in a single day.
This divergence in performance suggests that the altcoin bull market may have already concluded—or that it never really began in the first place.
Why Altcoins Are Underperforming
Conventional market wisdom suggested that institutional inflows into Bitcoin would eventually spill over into altcoins, lifting the entire market. However, the current cycle is different.
The sheer number of new altcoin projects—many with high fully diluted valuations (FDV) and low circulating supplies—has diluted market liquidity. These “VC coins” often generate poor returns for retail investors post-listing, as early investors, teams, and airdrop recipients sell into any strength.
This constant sell pressure has eroded confidence in altcoins, driving many traders to shift into Bitcoin or meme coins, which are perceived as having fairer distribution mechanisms. Until altcoins demonstrate sustained, broad-based rallies with real wealth creation effects, this trend is unlikely to reverse.
Significant monetary expansion—similar to the 2020 stimulus measures—could theoretically reverse this dynamic, but current macroeconomic conditions make such a scenario improbable.
Trading Strategies and Short-Term Outlook
Given these structural challenges, my approach to altcoins has shifted:
- Avoid long-term holdings; focus on short-term, high-conviction trades.
- Prioritize high-attention projects over lesser-known ones.
- Set strict stop-losses even for spot altcoin positions.
For Bitcoin, I believe that—barring a major economic crisis in the U.S.—the bull market remains intact. Corrections may be deeper than those in traditional equities, but drops of 70-80% are unlikely.
Near-term, I expect the market to enter a period of consolidation after Monday’s sharp decline. Historical patterns suggest that violent sell-offs are often followed by a basing process, which may include retests of the lows. Avoid the urge to predict the exact bottom; instead, focus on risk management.
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Frequently Asked Questions
Is the crypto bull market over?
Not necessarily. While altcoins are under severe pressure, Bitcoin’s bull market may still be intact. Market cycles often include sharp corrections, and the long-term trend could remain positive.
Should I sell my altcoins now?
It depends on your risk tolerance and investment horizon. If you're holding altcoins with weak fundamentals or constant unlock schedules, consider reallocating to Bitcoin or stablecoins. Always use stop-loss orders.
What caused the sudden market crash?
A combination of factors including potential new tariff policies, doubts about AI-related stock valuations, and delayed interest rate cuts contributed to the sell-off. Crypto markets reacted ahead of traditional markets due to their 24/7 nature.
Will altcoins recover?
Recovery is possible but may require a fundamental shift in market structure or a new wave of retail interest. For now, traders are favoring Bitcoin and meme coins over traditional altcoins.
How should I manage risk in this market?
Reduce leverage, diversify into major cryptos, and avoid emotional trading. Stay informed with reliable market analysis and be prepared for volatility.
Is now a good time to buy the dip?
It might be, but avoid trying to time the absolute bottom. Consider dollar-cost averaging or waiting for the market to show signs of stabilization before entering new positions.