(Bloomberg) -- One of the more dependable trading patterns in crypto appears to have become less reliable during the swift drawdown from the all-time highs reached amid the exuberance around the re-election of Donald Trump.
In the past, smaller, lesser-known tokens that were commonly referred to as altcoins tended to outperform market leader Bitcoin toward the end of crypto rallies as speculators sought to profit from their higher volatility, in what traders called “alt season.”
That’s changed this cycle, with cryptocurrencies like Solana and Dogecoin more closely mirroring the moves in Bitcoin, which still accounts for around 60% of the value of the estimated $2.7 trillion crypto market.
“We used the term when the digital assets industry was just getting started,” said Jeff Dorman, chief investment officer at Arca. “Alt season happened once or twice in the past, but that doesn’t mean that it will continue to be an event.”
During the 2021 bull market, Bitcoin rallied, and then a slew of alt coins followed suit as a second wave. This time, Bitcoin and the other coins have been moving in tandem, and crashed at the same time. Bitcoin is down as much as 28% since its peak in January. Solana and Dogecoin, which are more volatile, are down more than 50% from their recent highs.
That’s even with the short-lived crypto rally over the weekend, when Trump said in a posting on his Truth Social platform that his January executive order on crypto “directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA.” After surging 23% on Sunday on the announcement, Solana had erased all the gains by early Tuesday.
Bitcoin slumped around 2% to $83,634 as of 12:09 p.m. in New York. Solana was 2% lower, while Dogecoin slipped 1.2%. XRP and Cardano were both little changed.
Traders are concerned about macro economic trends, involving tariffs that kicked off this week and inflation. Recent scandals including the Libra memecoin and the massive hack of the Bybit crypto exchange have added to the uneasiness.
“Right now, this is more typical to what we saw in 2018, 2019, 2020, when the entire market would move together,” Sadie Raney, chief executive officer of EVE Wealth, a yet-to-be launched platform for female digital-asset investors, said in an interview. “It used to be, you only needed to watch Bitcoin price, because everything moved together. What we are seeing right now is just a broader overall sentiment shift, where people are a little bit concerned about all aspects of the market.”
The launch of Bitcoin exchange-traded funds in the US a year ago created a gulf between the world’s biggest digital currency and other tokens, said Cosmo Jiang, a general partner at Pantera Capital. Most other coins remained unaccessible through brokerage accounts, “and the more that happens, the more it builds on itself, because these are momentum assets,” he said. Bitcoin ETFs were hit by a record $3.3 billion in outflows last month.
Even so, the Securities and Exchange Commission is expected to approve ETFs for a slew of other cryptocurrencies later this year, making these coins more accessible to casual traders. But just as with Ether ETFs that were approved mid-last year, demand risks falling short of expectations for the funds. And that may suggest that the notion of “alt season” could be gone for good.
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