Crypto Liquidity Crunch Deepens as Altcoin Market Echoes Pre-Pandemic Stress Levels
Key Takeaways
- Crypto liquidity remains tight, with Bitcoin as the only asset seeing strong market demand.
- An analyst warns that many altcoins could see an 80% drop after listing on exchanges.
- The liquidity crisis may persist until late 2025 or 2026, delaying any meaningful altcoin recovery.
The cryptocurrency market is grappling with a deepening liquidity crunch, marked by declining trading volumes and thinning market depth.
While Bitcoin (BTC) remains resilient, altcoins are facing conditions reminiscent of the pre-COVID-19 era, when illiquidity led to extreme volatility and suppressed price growth.
Now, analysts warn that this crisis may persist for another year or more, casting doubt on any near-term altcoin revival.
Why Crypto Liquidity Is Drying Up
Liquidity in crypto markets depends on active buying and selling. Higher participation generally improves liquidity and supports price stability. However, according to crypto analyst AB KuaiDong, liquidity remains tight across the board—except for Bitcoin.
At the same time, Bitcoin’s dominance has surged to 61% despite the price struggling to hold above $100,000. Meanwhile, altcoin dominance has dropped by 19% year-to-date—a sign that capital is fleeing riskier assets.
VC-Backed Tokens Are Taking the Hardest Hit
KuaiDong believes the worst may not be over for altcoins, particularly those backed by VCs.
He predicts that newly listed tokens on Binance, Bybit, and other major exchanges could see price declines of 80% or more post-listing.
“The cleansing of VC coins will most likely continue. At the beginning of last month, my colleagues and I advised all project owners to be prepared for a drop of more than 80% after listing. That is, a project with an initial offering of 2 billion may fall to 300 million; a project with an initial offering of 700 million may fall below 100 million.” Dong added.
“How much more money are you willing to lose on altcoins to learn that there is only BTC worth touching in crypto?” The analyst asked his 80,000 followers on X.
Will Altcoins Find a Bottom?
For now, KuaiDong doesn’t see relief coming anytime soon. He expects the current trend to last until at least late 2025 or 2026, as funds struggle with poor returns and raising new capital becomes increasingly difficult.
However, he suggested that if the downturn continues on a large scale, it could eventually mark the bottom for altcoins—potentially setting the stage for a long-term recovery.
Until then, the message from analysts is clear: in this liquidity-starved market, Bitcoin remains the safest bet.
Binance Continues Delisting Crucial Liquidity Pools Bringing the Era of User Rewards to an End
Is It Altcoin Season Yet? Investors Selling ETH Short Positions and Hodling
