After four years of waiting, investors are still anticipating a revival in altcoin euphoria. However, the market is signaling a clear shift. Bitcoin remains dominant in capital inflows, with technical analysis highlighting excessive leverage as the unexpected culprit trapping prices.
If you feel like your altcoin portfolio is stagnating while Bitcoin makes headlines, you’re not alone. The data is clear: the TOTAL3 index (crypto market cap excluding Bitcoin and Ethereum) has just recorded its fourth consecutive year of decline against BTC. This marks a sharp break from the 2021 cycle, when altcoins dramatically outperformed the market leader.
Bitcoin Dominance (BTC.D) continues to climb, rising from approximately 40% in 2022 to over 60% in early 2026. In concrete terms, this means the vast majority of incoming capital, particularly through ETFs and institutional flows, is pouring exclusively into Bitcoin. The era when BTC profits automatically trickled down to smaller cap coins appears to be over.
This structural divergence calls into question the very concept of “cycles” as we’ve known them. Where 2021 saw TOTAL3 explode by 541%, recent attempts at altcoin rallies are systematically sold off, leaving retail investors holding heavy bags.
Why can’t altcoins launch a genuine bull run anymore? The answer lies in market mechanics, specifically in funding rates. The altcoin market is saturated with leveraged long positions.
This overcrowding of traders betting on upside creates a toxic environment. As soon as price attempts to rise, funding rates explode, making it expensive to maintain positions. Conversely, the slightest sideways movement or minor Bitcoin correction triggers cascading liquidations across altcoins. It’s a genuine trap: the volatility needed for a bullish explosion is suffocated by an overleveraged, over-indebted market.
Unlike Bitcoin, which benefits from robust institutional spot demand, altcoins remain the playground of retail speculation through derivatives. Without massive deleveraging or a major fundamental catalyst, the probability of seeing an alt season similar to 2021 diminishes with each passing day.
With Bitcoin trading around $90,000 in early January, the question of portfolio allocation becomes critical. Should you capitulate on altcoins to take refuge in the safe haven? While the underlying trend remains bearish for the ETH/BTC ratio and other pairs, selective opportunities could emerge in specific ecosystems like Solana, which are attempting to decouple.
However, caution is warranted. If Bitcoin dominance continues its climb toward 70%, liquidity in altcoins could dry up further. Although Bitcoin should find a bottom in 2026, you’ll need to selectively choose only altcoins with solid fundamentals. Speculative memecoins are likely to continue suffering from this excess of longs and leverage effects.
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Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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