Wintermute: The market is adjusting; mainstream coins need to lead the upward trend.

Author: Wintermute; Source: X, @wintermute_t; Compilation: Shaw Golden Finance

As position adjustments and some risk assets return, the market tone has improved. Bitcoin may need to move further closer to its all-time high before altcoins rebound and market breadth can expand. Upcoming US regulatory and political headlines are the next key drivers influencing market volatility.

Macro Market Update

This week’s market tone shift is more about a change in sentiment than a change in direction. The shock from the October crash has largely subsided, and positions have been adjusted accordingly. Although cryptocurrency performance still lags behind other risk assets, the overall atmosphere no longer feels as fragile. Headlines have played a role in boosting confidence. Trump’s proposed $2000 “stimulus plan” (via tariff refunds) briefly lifted risk sentiment over the weekend, even though it was later reinterpreted as a tax cut, it still achieved its purpose: reminding the market that fiscal support remains in place. Additionally, hopes for the end of the US government shutdown and softening macroeconomic data have given traders reasons to take on risk selectively. Digital assets remain the worst-performing cross-asset class, indicating that market sentiment may be improving, but capital flows have yet to catch up.

Bitcoin has maintained around $105,000, while Ethereum hovers near $3,500. Despite ETF outflows for a week straight, both have shown resilience. Altcoins rebounded on Monday, but the recovery has been uneven. The GMCI-30 index rose 0.7% this week, led by sectors including:

• DePIN: +22%
• L2s: +13%
• Mid Caps: +15%
• AI: +9.6%
• DeFi: +8.8%
• Utilities: +5.9%
• L1s: -1%
• Memes: +4.6%

This rotation reflects current risk appetite levels. Investors are increasing holdings, but the scale remains modest. The GMCI gains are mainly due to weekend rebounds rather than a structural shift in capital flows. Market breadth remains very narrow, with only a few tokens (like FIL, AR, etc.) contributing most of the gains. Breakout moves still seem unlikely and are concentrated in a few fragile momentum sectors that could quickly fade.

The macro environment remains favorable. Rate cuts are ongoing, quantitative tightening has ended, and global easing policies continue. The overnight financing rate (SOFR) is declining, generally aligning with the policy rate, albeit with a slight lag. However, cryptocurrency performance differs from other risk assets: speculative elements are diminishing, rebounds are limited and rotational, and capital prefers holding mainstream coins rather than fringe altcoins.

Based on current trading patterns of major coins, an altcoin rally seems unlikely to arrive soon. Historically, when mainstream coins approach their all-time highs, altcoins tend to perform well, creating a wealth spillover effect. When Bitcoin is within 10-20% of its all-time high (currently 16%), Bitcoin outperforms altcoins about 54% of the time. When Bitcoin nears $100,000, historical data suggests Bitcoin’s outperformance probability increases to about 58%.

This indicates that spillover effects are dynamic and can be quantified, which also explains why last week’s gains in coins like FIL, ICP, FET were so fragile, and why the rally has completely faded due to the market not receiving confirmation signals of trend continuation from Bitcoin.

However, this does not mean all altcoins outside the main coins are dead. A few blue-chip tokens (like HYPE, ENA, UNI, etc.) continue to outperform the market thanks to catalysts such as clearer US regulatory signals and rumors of domestic market reopening. But the broader altcoin market remains volatile like options: after brief upward momentum, unless Bitcoin rises, sustained strength is unlikely. Until mainstream coins regain dominance, predicting a sustained altcoin rally remains difficult.

Our Perspective

The strong market environment and renewed momentum have boosted confidence in this rally. The key question now is whether the main coins can rebound to higher levels, after which market breadth may recover.

Positions have been readjusted, market sentiment has improved, and after weeks of oscillation, the market has finally stabilized. Cryptocurrencies still perform the worst among cross-asset classes, but the overall market tone has shifted: the October crash seems behind us, and selective risk appetite is returning. The rebound in DePIN, L2, and AI sectors indicates ongoing demand in related fields, but market breadth remains narrow and the market structure fragile.

In the next phase, main coins need to lead the market. History shows that only when Bitcoin approaches its all-time high do altcoins follow suit. Currently, Bitcoin is around $105,000 (down 16% from its all-time high), and this has not yet triggered such rotation. It appears to be more of a turning point than a stagnation: the structure is clearer, macro conditions are favorable, and the market seems poised for another rally. As US regulatory news resumes and is soon announced, the next wave of volatility will likely stem from policy and political factors rather than position adjustments.