DWF Labs: “Altcoin market structure shifting…sector rotation instead of a broad-based rally”

An analysis suggests that the structure of the crypto-asset market is changing, driven by growing institutional inflows and the expansion of exchange-traded funds (ETFs). The argument is that an “altcoin season,” in which altcoins across the board rise simultaneously as in the past, is becoming harder to materialize.

According to crypto-focused outlet Coindoo on the 16th, Andrei Grachev, co-founder of DWF Labs, said in a recent interview that the current altcoin market environment is markedly different from previous cycles.

Grachev explained that as institutional capital concentrates in Bitcoin (BTC) and Ethereum (ETH), the spillover of liquidity into mid-cap altcoins has weakened. In particular, with spot Bitcoin and Ethereum ETFs establishing themselves as key channels for institutional investors, capital is increasingly tending to remain in large-cap assets.

He said, “In the past, when Bitcoin rose, altcoins across the market tended to rise together, but now the number of tradable tokens has increased sharply, making it difficult for capital to spread across all assets at the same time.”

Instead, he said there is a high likelihood of repeated short-term rotations of capital into specific themes. For example, areas where a particular narrative has formed—such as artificial intelligence (AI) tokens or real-world asset (RWA) tokenization projects—could see sharp gains over a short period before capital quickly rotates into other sectors.

However, he stressed that he was not presenting a negative outlook for the broader crypto market. Grachev said, “After market deleveraging runs its course, institutional inflows could resume, and major assets may record new all-time highs in the first half of this year.”

Meanwhile, market indicators still point to a Bitcoin-led trend. CoinMarketCap’s Altcoin Season Index stood at 45 as of the 15th. While up from 35 last month, it remains well below the altcoin season threshold of 75.