The recent surge in Bitcoin's price, breaking past significant psychological barriers like $10,000, $11,000, and even touching nearly $14,000, has captivated global attention. However, many investors have noticed an unusual trend: while Bitcoin soared, most alternative cryptocurrencies, or "altcoins," stagnated or even declined. This phenomenon, often called "Bitcoin dominance" or the "Bitcoin吸血效应" (blood-sucking effect), raises important questions about market dynamics and investment strategy.
Understanding Altcoins and Market Cycles
Altcoins, short for "alternative coins," originally referred to any cryptocurrency other than Bitcoin. They were often created by modifying Bitcoin's original source code. Early examples include coins like Litecoin (LTC) and even Ethereum (ETH). Over time, as some projects proved their utility and gained substantial market capitalization, they graduated from being called "altcoins" to being recognized as "major coins" or "主流币."
Today, the term "altcoin" typically refers to smaller, non-Bitcoin, non-major cryptocurrencies. New ones appear almost daily, each hoping to capture a share of the crypto market.
Historically, altcoin prices have often moved in correlation with Bitcoin. When Bitcoin rises, altcoins tend to rise; when Bitcoin falls, altcoins usually fall even harder. However, the recent bull run has broken this pattern. Bitcoin's price skyrocketed, but altcoins largely failed to follow, leaving many of their holders watching losses mount even in a rising market.
The Mechanics of the Current Bitcoin Rally
This bull run is fundamentally different from the famous 2017 boom. Understanding why is key to understanding the altcoin slump.
1. The Driving Force: Institutional Investment
The 2017 rally was largely fueled by retail investors and the Initial Coin Offering (ICO) frenzy centered around Ethereum. This time, the primary buyers are large institutional players. Firms like Grayscale Investments have been accumulating Bitcoin at an astonishing rate. Reports indicate that in April 2019 alone, Grayscale bought over 11,000 BTC, equivalent to about 21% of that month's new supply.
This institutional demand creates a powerful upward pressure on Bitcoin's price. These large funds seek a deep, liquid market to deploy significant capital, and among cryptocurrencies, only Bitcoin currently provides that "deep pool." As institutions buy up available supply, the price is driven higher.
2. A Shift in Narrative
The 2017 narrative was about "blockchain technology," "smart contracts," and the potential of new "public chains" to disrupt industries. In 2023, the narrative has refocused on Bitcoin's original value proposition: "digital gold." In a climate of global economic uncertainty, Bitcoin is increasingly seen as a sovereign-free store of value and a hedge against inflation. It is perceived as the only proven, secure, and decentralized cryptocurrency with a long track record.
3. The FOMO Effect (Fear Of Missing Out)
As Bitcoin's price climbs, it creates a self-reinforcing cycle. Media coverage intensifies, attracting more investors. Seeing Bitcoin rise while their altcoin portfolios stagnate, retail investors often feel a "FOMO" to sell their altcoins and jump into Bitcoin. This mass migration of capital from altcoins to Bitcoin accelerates the "吸血效应," where Bitcoin sucks liquidity and value out of the rest of the market.
The "Self-Help" Tactics of Altcoin Projects
Faced with this capital drain, many altcoin projects have resorted to aggressive, and often risky, tactics to attract attention and prop up their prices.
1. Pump Signaling ("喊单")
Some project leaders and influencers have taken to social media and messaging apps to aggressively promote their coins, encouraging followers to buy en masse to artificially inflate the price. A famous example involved the project XMX, whose founder publicly urged his community to "buy together, sell together, and see who runs faster," openly admitting that mutual speculation was their sole market strategy.
2. Ponzi-Economics Models ("资金盘")
Other projects have created schemes that resemble Ponzi or pyramid structures. They promise high, guaranteed returns for locking up their tokens and, crucially, offer even higher rewards for recruiting new investors.
- TNB: launched a "Time is Money" game where investing $500 worth of TNB tokens locks 60% for "dividends" and puts 40% into a bonus pool. Returns are based on both the investment and on recruiting others.
- TrueChain: developed a scheme called "Troy" where users are incentivized to buy TRUE tokens, lock them for 180 days for a daily 1.5% return, and earn more by referring others.
While these schemes can create short-term price pumps due to artificial demand, they are inherently unsustainable. They rely on a constant influx of new money to pay returns to earlier investors. When that influx stops, the scheme collapses, often resulting in significant losses for those who entered late.
A Word of Caution for Investors
The current market dynamic presents a clear challenge. Bitcoin's rise, driven by strong fundamental reasons, may continue, but its volatility remains extreme. Meanwhile, the desperation of some altcoin projects has led to an environment rife with predatory schemes.
Chasing the high yields promised by these "self-help" mechanisms is extremely risky. As the old adage goes: you might be attracted by the promised dividends, but they are after your principal investment. 👉 Explore more secure investment strategies
The famous trader Peter Brandt has drawn a parallel to the 2001 dot-com bubble, suggesting that many altcoins may never recover, just as many tech companies from that era never did. This doesn't mean all altcoins will fail, but it underscores the importance of extreme due diligence. Investors should focus on projects with clear utility, active development, and genuine user bases, rather than those relying purely on marketing hype and financial engineering.
Frequently Asked Questions
Q: What exactly is an altcoin?
A: An altcoin is any cryptocurrency that is not Bitcoin. The term was originally applied to all alternatives but is now commonly used to describe smaller, less established cryptocurrencies beyond major ones like Ethereum or Litecoin.
Q: Why did altcoins not rise with Bitcoin this time?
A: This rally is primarily driven by large institutions investing in Bitcoin as a macro asset. Their focus is solely on Bitcoin's liquidity and safety, not on the speculative potential of smaller altcoins. This, combined with retail investors switching from altcoins to Bitcoin, has drained value from the altcoin market.
Q: What is the "Bitcoin dominance" rate?
A: Bitcoin dominance refers to the percentage of the total cryptocurrency market capitalization that is made up by Bitcoin. When this percentage rises, as it has to over 60%, it means Bitcoin is outperforming the rest of the market.
Q: Should I sell my altcoins to buy Bitcoin?
A: There is no one-size-fits-all answer. It depends on your investment goals, risk tolerance, and belief in the specific altcoins you hold. Diversification can be a sound strategy, but it's crucial to understand the fundamentals of each asset you own.
Q: Are all projects using high-yield schemes scams?
A: Not all, but many are. Promises of guaranteed, unsustainable high returns through locking tokens and recruiting others are major red flags. They are often designed to benefit the creators and earliest participants at the expense of later investors.
Q: Will altcoins ever recover?
A: History shows that during bull markets, capital eventually flows from Bitcoin into altcoins. However, a recovery is not guaranteed for every project. The market may become more selective, with value accruing to projects with real-world use cases and strong fundamentals, while many others may fade away.