# I. Introduction
With Bitcoin's price once again surpassing the $100,000 mark and Ethereum experiencing a significant rebound, the overall cryptocurrency market is on the rise. On-chain activities and trading volumes across multiple public chains have significantly increased, indicating a renewed enthusiasm for capital inflow and a continuous recovery in risk appetite. Under the dual influence of macroeconomic benefits and the market's intrinsic momentum, the cryptocurrency market is currently in a high-energy accumulation phase.
Against this backdrop, there is widespread market attention on whether the altcoin season has begun. This article conducts an in-depth analysis of the characteristics and driving factors of the current market from multiple dimensions, including the macroeconomic environment, market structure, on-chain indices, characteristics of this altcoin cycle, and trends in potential sectors, providing readers with a reference to grasp the current landscape and future trends of the cryptocurrency market.
# II. Macroeconomic Background and Market Structure Analysis
With the easing of tariff tensions between the U.S. and China, global liquidity loosening, Trump's repeated calls for interest rate cuts, and the continuous improvement of the cryptocurrency regulatory environment, the structure of the cryptocurrency market has undergone profound adjustments: Bitcoin's dominance has declined, the altcoin season index has strengthened, and the supply of stablecoins has surged, laying a solid foundation for the evolution of the subsequent altcoin market.
1. Macroeconomic Environment and Policy Background
Recently, there have been many favorable signals for risk assets in the global macroeconomic environment. U.S. inflation has significantly retreated, with the April CPI year-on-year at only 2.3%, a four-year low, allowing the Federal Reserve to remain on hold in May, keeping the federal funds rate in the 4.25%-4.50% range. Meanwhile, the U.S.-China trade war has seen significant easing: both sides reached a 90-day tariff suspension agreement, with the U.S. reducing tariffs on Chinese products from the original 125%-145% to 10%-30%, and China also reducing tariffs from 125% to 10%. This "ceasefire" has alleviated concerns about an economic recession, leading Wall Street institutions to lower their recession probability expectations. U.S. President Trump has repeatedly pressured the Federal Reserve to cut interest rates quickly. Although Federal Reserve officials remain cautious about early rate cuts, the market expects two moderate rate cuts in the second half of the year.
This series of macroeconomic positive news has increased global risk appetite, with capital flowing back into stocks, cryptocurrencies, and other risk assets. The improvement in the macro environment has laid the groundwork for a structural bull market in the cryptocurrency market by 2025: expectations of easing have strengthened, liquidity has returned, and investors are "holding cash" ready to buy various crypto assets at lower prices. As of May 15, the total market capitalization of cryptocurrencies has risen to $3.5 trillion.
2. Changes in Cryptocurrency Market Structure
The structure of the cryptocurrency market has shown significant changes in this cycle. First, Bitcoin's dominance has peaked and begun to decline. At the beginning of the year, due to the influx of institutional funds, Bitcoin's market capitalization share (BTC Dominance) rose steadily, reaching nearly 64-65% in early May, reflecting that the market was still in a "Bitcoin season." As Bitcoin returned to the $100,000 mark on May 9 and continued to rise, funds began to rotate from Bitcoin to a broader range of altcoins. According to TradingView data, Bitcoin's dominance plummeted by about 4.6 percentage points in just one week, marking the largest single-week decline of the year. The peak and subsequent decline in Bitcoin's market share is one of the typical signals for the onset of "altcoin season" in history.
Source: https://www.tradingview.com/symbols/BTC.D/?timeframe=YTD
At the same time, the overall market capitalization of altcoins has rebounded significantly. The total market capitalization of altcoins (excluding BTC) fell to about $930 billion in April but has strongly rebounded in May, currently surpassing $1.45 trillion, successfully breaking through the descending wedge pattern that has persisted since the end of 2024, entering a new upward wave. This breakthrough corresponds to a significant decline in the Bitcoin dominance curve and the "departure" of funds from Bitcoin as a single asset, reallocating to other cryptocurrencies.
Source: https://www.coingecko.com/en/global-charts
3. Analysis of the Altcoin Season Index
A more intuitive sentiment indicator is the "Altcoin Season Index." According to Coinglass data, this index fell to a low of 14 on April 26. The altcoin season index has quickly risen to 31. Although it has not yet reached the threshold of 75 for a "formal altcoin season," it has moved away from the state of Bitcoin's dominance and into a neutral to strong area. This confirms that market sentiment is shifting from conservative to adventurous: investors are beginning to increase their positions in altcoins. This shift in sentiment is also reflected in on-chain data, with the number of active addresses and trading volumes showing significant growth across multiple public chains in early May, indicating an increase in investor participation. The total trading volume on DEXs also rose by 30% in a week, reaching $8.4 billion. The long-dormant on-chain activities have become active again, indicating a warming of market sentiment.
Source: https://www.coinglass.com/pro/i/alt-coin-season
In addition, the total market capitalization of stablecoins reached a historical high of about $245 billion in early May. Among them, the leading stablecoin USDT saw a surge in supply, with its market capitalization surpassing $150 billion. In contrast, during the peak of the 2021 bull market, USDT was about $83 billion. As a bridge between fiat currency and cryptocurrency, the surge in stablecoin supply indicates that a massive amount of capital is entering the market through stablecoin channels and waiting for the right moment to enter, providing "fuel" for further altcoin price increases. Funds are expected to continue converting from stablecoins to BTC and various altcoin assets, driving a new round of market activity.
# III. Characteristics of the Current Altcoin Market
Historical experience shows that altcoin seasons typically occur after significant increases or peaks in Bitcoin's price, as funds begin to seek higher yields by flowing into mid- and small-cap cryptocurrencies. Bitcoin's breakthrough above $100,000 has triggered the start of this altcoin season, with the rhythm of capital rotation consistent with past cycles. However, compared to previous altcoin seasons, this cycle has notable differences in duration, structure of price increases, and participant profiles.
Duration and Initiation Rhythm: Previous altcoin frenzies often lasted for several months during Bitcoin's range-bound or even corrective phases. In contrast, this cycle has only just begun to show its potential as of mid-May, with many altcoins experiencing moderate price increases. As one analyst humorously noted, "Most altcoins have dropped 90% from their December highs, and when they rebound 10% this week, some people shout, 'The long-awaited altcoin season has arrived.'" The full-scale explosion of the altcoin market has not yet reached the level of excitement seen in previous cycles. The altcoin season index has just risen from the bottom but is far from reaching the typical frenzy line of 75; social media attention and retail FOMO sentiment are still brewing. Therefore, this altcoin market may have a slower rhythm and last longer, rather than the rapid surges and drops seen in the past.
Structure of Price Increases and Rotation Order: This altcoin market is characterized by "large-cap leading, gradually expanding." At the beginning of May, large-cap cryptocurrencies such as ETH, Solana, and BNB initiated the rally, with daily increases ranging from 5% to 15%. Subsequently, mid-cap mainstream coins (such as MKR, CRV, AAVE, etc.) also saw follow-up increases. In contrast, small-cap coins and long-tail assets did not immediately surge in tandem. This may reflect that current funds are more inclined towards projects with fundamental support, and the speculative frenzy has not yet fully unfolded. Of course, as the market evolves, it is not ruled out that mid- and small-cap coins may also see follow-up increases or even explosive growth.
Driving Narratives and Nature of Funds: The altcoin boom of 2017 was driven by the ICO concept, with many new tokens skyrocketing based solely on white papers; in 2021, narratives such as DeFi, Dogecoin mania, and NFTs/metaverse took turns dominating, fueled by massive retail sentiment. The narrative of this cycle is more diverse and "professionalized." The leading themes in the market, such as AI and RWA, attract not only speculative funds but also a significant proportion of institutional and industrial capital.
Investor Structure and Profile: The participant structure in the current cryptocurrency market is characterized by a significant decrease in retail participation compared to the previous cycle, while the proportion of institutional capital has increased. Institutional investors have played the role of "incremental funds" in this cycle. This means that the current market often involves institutional competition against institutional players. The current market participants are more experienced "veterans" who have gone through multiple cycles, with funds rapidly switching between sectors, and the duration of hot spots is shorter, lacking the kind of unilateral frenzy seen when retail investors rush in. This validates the characteristic of short-term speculation in the absence of retail investors, but a lack of long-term trends. Additionally, the increase in the proportion of the derivatives market indicates that more professional funds are using strategies involving futures and options for leveraged trading, which is distinctly different from the past when retail investors only bought spot assets. All of these factors contribute to a more complex rhythm and structure in this cycle.
Regulatory Environment and Market Ecology: Previous altcoin frenzies often occurred during periods of relatively lax regulation and "wild growth," whereas global regulation is now accelerating its involvement. In this cycle, regulatory factors have instead become a tailwind: the U.S. regulatory stance is becoming more lenient, ETFs have been approved, trading has been opened in places like Hong Kong, and Bitcoin is being considered as a strategic reserve, all providing positive expectations for the market. This means that institutional funds can participate in cryptocurrency asset investments more aggressively. This ecological change suggests that this altcoin season may be more orderly and emphasize value support.
# IV. Analysis of Potential Sectors and Trends in Popular Narratives
1. The Meme Coin Frenzy Continues
Without a doubt, meme coins have become the most active sector in the cryptocurrency market. The launch of Pump.fun has lowered the barrier to creating meme coins to zero, allowing "everyone to mint coins" and igniting a gold rush for meme coins. Despite the overall market being sluggish at the beginning of this year, with CZ's endorsements, the launch of the BNB chain meme launch platform Four.me, the introduction of Binance Alpha, the TGE of Binance Wallet, and the Alpha points mechanism, the BNB chain has become the second-largest active network for meme coins, only behind Solana. Recently, meme launch platforms have gradually broken the monopoly of Pump.fun. With the launch of Raydium's LaunchLab and the emergence of Letsbonk.fun and Believe based on it, Eliza Labs has released auto.fun, replicating the "zero-code issuance" experience of pump.fun and adding AI agent deployment features. Meme tokens will continue to experience explosive growth, further enhancing their speculative nature and volatility.
In addition, established meme coins like DOGE and SHIB have finally found new catalysts in 2025 after a long period. In addition to the resurgence of established meme coins, newer meme coins like BONK, WIF, PEPE, MOODENG, POPCAT, and FARTCOIN have taken turns to drive up prices. As a meme coin associated with Trump, TRUMP has experienced fluctuations since its issuance in January, but following the event-driven "TRUMP Dinner" on May 22, the coin price saw a significant rebound. This indicates that meme coins with active communities and sustained influence will gradually break free from the limitations of short-term speculation and solidify a more stable consensus value.
The funding sources for meme coins mainly come from speculative retail investors. Currently, on-chain data shows that transactions are frequent but of small individual scale, with a clear characteristic of fast in-and-out trading. At the same time, discussions about meme coins on social media platforms like Twitter and Reddit have increased, with some KOLs starting to recommend "today's tenfold potential coins" daily, indicating that speculative sentiment is brewing.
2. AI Sector Remains Hot
Since the explosion of the AI wave triggered by ChatGPT last year, a number of AI concept coins, such as FET, AGIX, and OCEAN, briefly took off. However, as the market cooled, these tokens experienced deep corrections. Entering 2025, global attention on artificial intelligence has only increased, coupled with a bullish turn in the cryptocurrency market, the AI sector has become active again. Since April of this year, several AI concept coins have seen rapid price increases, far exceeding the overall market. Fetch.ai (FET) has continuously announced technological advancements over the past few months and has formed partnerships with Google Cloud, showing positive fundamentals. Technically, FET has formed a rounded bottom pattern after bottoming out in February and created a classic cup-and-handle pattern in mid-April, indicating that the market is full of expectations for its return to a bull market.
The two AI Agent projects, Virtuals Protocol (VIRTUAL) and ai16z (AI16Z), saw impressive gains at the end of 2024, but at the beginning of this year, they lost about 90% of their market value during the overall correction. In April, as the market warmed up, both experienced explosive rebounds, refocusing market attention on the popular concept of "AI agents." In the second half of 2025, if global AI applications continue to surge, AI narrative tokens may see a dual reinforcement of fundamentals and market sentiment.
3. Layer 2 Expected to Rally
Ethereum's Layer 2 scaling has been one of the most important technological trends in the cryptocurrency space over the past two years. Entering 2025, this sector continues to evolve and has seen some new changes. The Layer 2 sector is showing a multi-faceted competitive landscape: Arbitrum leads in user numbers and ecological DApps, Optimism maintains influence with OP Stack, while Base rapidly expands its user base leveraging Coinbase's resources. Compared to ecological progress, the performance of Layer 2 project tokens in this round of market activity has been relatively lackluster. Since April, both ARB and OP have seen moderate rebounds with the market, but their overall gains lag behind the broader market. Especially for Arbitrum, the community governance turmoil following last year's airdrop and the subsequent 80% drop in price have dampened market confidence, leading to cautious expectations for recovery. Despite the short-term performance of tokens being mediocre, the long-term potential and strategic position of the Layer 2 sector are still viewed positively by industry insiders.
It is worth noting that the strong recovery of high-performance L1s like Solana, BNB, and Sui poses some competitive pressure on Layer 2, but from the perspective of compatibility and security, Layer 2 remains the preferred path for expanding the Ethereum ecosystem. If the market continues to evolve, subsequent funds may rotate from overheated small-cap coins back to these high-market-cap platform tokens, achieving a rally.
4. RWA Sector Favored by Institutions
RWA (Real World Assets) is another significant narrative for institutions in this round of the cryptocurrency market. Against the backdrop of rising interest rates in traditional assets due to the Federal Reserve's continuous rate hikes, the embrace of RWA by DeFi is seen as a "win-win" strategy: DeFi users can obtain stable on-chain yields, while traditional institutions can expand their financing channels. MakerDAO and Ondo Finance are the two pillars of the RWA sector. MakerDAO has configured government bonds through its "Endgame Plan," providing reliable yields for its stablecoin DAI, allowing MKR token holders to share in the protocol's profits and enhance its value; Ondo directly offers tokenized U.S. Treasury funds to institutions and large holders, innovatively allowing on-chain users to conveniently hold traditional financial products. Additionally, projects like Maple Finance (providing on-chain credit for institutions) and Centrifuge (an asset securitization token platform) are also worth attention. Each of these projects has its focus, but they collectively promote the integration of on-chain and off-chain finance.
Although the RWA concept is hot, the participation of ordinary retail investors is currently relatively limited. Many RWA products involve compliance requirements (KYC, accredited investor thresholds) and specialized knowledge, leaving small investors mostly at the conceptual stage. This means that the market activity in the RWA sector is primarily driven by large funds.
# V. Conclusion and Outlook
Various signs indicate that the cryptocurrency market has significantly warmed up, but the true peak of frenzy may still be ahead, with the "altcoin season" on the horizon. Bitcoin's dominance has declined from its high, numerous altcoins are rising in succession, new narratives are emerging, and market sentiment is shifting from caution to greed… Overall, the market is currently in a transition phase from a "Bitcoin market" to an "altcoin market," with the altcoin season in its preliminary brewing and unfolding, but not yet at the most frenzied climax.
In summary, the current cryptocurrency market is at a delicate balance point: Bitcoin is leading the charge, altcoins are gearing up, and the interplay between institutional rationality and retail sentiment is evident. The altcoin season is brewing but has not fully erupted. We expect that as macroeconomic benefits continue and funds flow in further, the altcoin sector may welcome a more vigorous climax in the second half of the year. However, this time, the market may not simply replicate past frenzied patterns but evolve new characteristics in a mature market environment.
Macroeconomic liquidity will be a decisive factor influencing the length and height of this round of market activity. A consensus in the current market is that the Federal Reserve may begin to cut interest rates in the second half of 2025. Once we enter a substantial rate-cutting cycle, global liquidity will further loosen, and risk assets are expected to experience "accelerated growth in the latter half." Therefore, this round of the cryptocurrency bull market may see a "double peak"—rising in the first half driven by expectations and surging again in the second half due to actual easing. This means that the altcoin market may not only not come to an abrupt halt but may instead have a second spring to look forward to. If liquidity continues to improve and narratives continue to ferment, the climax of the altcoin season may emerge in the second half of 2025 or even early 2026. Until then, this feast is likely to continue for some time.
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