Are local highs approaching? Traders warn: altcoins are overheating and liquidity is scarce, indicating an increased risk of pullback.

As Bitcoin and Ether entered a period of weakness and consolidation after reaching new highs, the market atmosphere did not improve due to the prospects of interest rate cuts. Several traders have issued warnings that the open interest of altcoin contracts (OI) has surpassed Bitcoin for the first time, seemingly heralding the arrival of local peaks. At the same time, the high interest rates and tightening liquidity in the macro environment make this surge markedly different from that of 2021. Experts remind that a larger fluctuation or even correction may be expected before and after the FOMC interest rate decision, and investors should maintain patience and discipline.

alts OI surpasses Bitcoin, historical signal reappears

@arndxt_xo pointed out that the open contracts of altcoins (OI) have surpassed Bitcoin for the first time since last December. Every time this phenomenon has occurred in the past, it has been accompanied by local market peaks.

He emphasized that although the market seems optimistic, there is a very high probability of a correction after the FOMC meeting, and he suggests that investors "secure profits first, then decide whether to participate in the final surge."

( Bitcoin funds are shifting to altcoins! Galaxy Digital CEO: Interest rate cuts will drive another pump before the end of the year )

From Liquidity Overflow to Fiat Currency Depreciation: What are the Differences Between the Two Bull Markets?

The article further compares the reasons for the market upswing in 2021 and 2025:

2021: In an environment of low interest rates and an influx of capital, various projects flourished, and risk assets surged across the board.

2025: Under high interest rates and credit tightening, the pump is more driven by the depreciation of fiat currencies, with funds concentrating on Bitcoin and gold as "hard assets" and resilient quality targets.

He believes that this bull market, which only occurs with mainstream coins like Bitcoin, repeatedly exposes the market to the impacts of celebrity meme coins and scam projects, resulting in liquidity still being scarce and fragile:

Gamblers suffering from post-traumatic stress disorder (PTSD) continuously chase the dopamine brought by the next shiny project, leaving almost no sustained funding for true builders.

Liquidity "slow bleeding": Is a slight decline a precursor to a major drop?

Another trader @crypto_condom used a medical analogy to point out that the current slight decline in the market is like "precursor bleeding," often signaling a larger-scale collapse.

He believes that due to the excessive leverage in the alts market, a significant correction may occur around the announcement of the Interest Rate decision, which is expected to explode this week.

The market is still in the "skeptical" rather than "frenzied" phase.

@cointradernik also shared chart analysis on this, believing that the current trend is closer to the state of December 2023, rather than the frenzy moments in 2024 due to the ETF or Trump’s election.

He pointed out that if a large-scale short liquidation occurs next week, the market might strengthen again in the short term, but it is currently more likely to face several weeks of fluctuations, with market sentiment still lingering in the "doubt stage" and far from entering the frenzy.

Investment Philosophy: Patience and Discipline Prevail Over Chasing

In summary, although the coin price has indeed risen, the driving factors have shifted from "Liquidity Easing" to "Fiat Currency Depreciation," as liquidity becomes more precarious. Therefore, as @arndxt_xo said, investors need to remain rational.

Consistency beats hype, patience beats FOMO, and timing the entry and exit beats simply chasing excess returns.

(Adam Cochran's Bull Market Trading Rules: Consider leveraging only after a drop of more than 15%, regularly take profits for safety)

Is the local peak approaching in this article? Traders warn: altcoins are overheating and liquidity is scarce, signaling an increased risk of a pullback. Originally appeared in Chain News ABMedia.