Altcoins are moving back to exchanges as market weakness persists

The weakness in the altcoins market is expected to continue as Ethereum (ETH) appears on track to end January with a loss. Even blue-chip tokens from other narratives are being moved to exchanges for potential liquidation. 

On-chain monitors noticed that a series of established tokens were sent to exchanges, which could mean further delays in the anticipated altcoin market rally. Notably, the altcoin market index briefly indicated an altcoin season in 2024, but liquidity quickly returned to memes and AI agents. 

Despite the growing liquidity and rise in DeFi activity, whales still took profits from altcoins as soon as possible to avoid getting locked into years of drawdowns and losses. Historically, altcoin rallies have become shorter, which makes holders decisive in taking profits during favorable periods. 

For Maker (MKR), up to 0.12% of the supply was sent to Coinbase, with the potential to further depress the market price. Mantra (OM) had 0.20% of its supply sent to Binance. Other tokens flowing into exchanges included Worldcoin (WLD), Staked Ethereum (stETH), and even the recently hot Movement (MOVE). MOVE became prominent after the Trump family DeFi fund World Liberty Fi built up a stake of 2.39M tokens, valued at $1.98M. 

The inflows of altcoins to Bybit and Binance are not a guarantee of impending sales. In some cases, altcoins are accepted as collaterals and tools for passive income, which indicates that altcoin owners are aware of alternative tools for tapping the value of their assets.

Collateralized lending is a way to gain liquidity from altcoins, without causing a market slide. In the case of stETH, the asset is one of the most widely used for lending and other DeFi purposes. 

Altcoin season delayed again

Altcoins and DeFi tokens are viewed with skepticism as they consistently fail to sustain enthusiasm and rallies. The altcoin season index took another step back to 47 points, cooling down since its peak at 88 points in early December 2024.

One of the main reasons for the dwindling enthusiasm is the failure to deliver on an expected Ethereum (ETH) rally. Instead, ETH is set up to end January with a net loss. Ether traded at $3,219.29, still bound within its usual range. 

Despite the ‘buy’ signal for underpriced altcoins, some investors are no longer so trusting, instead focusing on the downside and potentially prolonged drawdowns. 

Some of the more liquid assets still post gains, and World Liberty Fi is an indicator of buying coins and tokens from previous cycles. The fund’s portfolio has expanded to over $410M after recent gains by some of its top token selections. 

However, the most active tokens in the DeFi ecosystem are not capable of sparking a market-wide rally. Bitcoin (BTC) remains dominant and still has the most active price moves, while more speculative traders are flocking to memes and AI agents.

Additionally, BTC institutional buyers and investors no longer intend to move into altcoins, creating a separate market with no flows between both asset classes. Despite this, a strong BTC performance could set the stage for more speculative investments.

There are also expectations that the crypto market is no longer split into Bitcoin and altcoin seasons, instead moving into the hottest and most liquid narratives with the possibility for an active turnover. 

Historical signs point to a potential Q1 altcoin rally

Despite this, the early 2025 BTC dominance is reminiscent of the 2021 bull market. There are still expectations for more active token price movements in Q1, reaching its peak in March. Other historical factors in 2017 and 2021 included a Fed Open Market Committee meeting, which preceded the respective altcoin seasons.

The historical expectations see the season delayed by up to 10 weeks, mostly due to the meme and AI agent trend. Additionally, trading has shifted to DEX, where demand is strongest for a very different set of tokens.

Utility assets and DeFi blue chips are still lagging. Historical altcoin markets also focused on hundreds or a few thousand coins and tokens. In 2025, there are an estimated 36.4M new tokens already created, with much heavier competition for liquidity.

The other source of growth may be the Solana ecosystem. SOL is still under $300, despite expectations for a higher valuation. Other altcoins expected to rally include RAY, JITO, and JUP, which are seen as undervalued due to their high fee production. 

Altcoin rallies also depend on the available stablecoin liquidity. The funds are not directly exchanged between BTC and altcoins. Instead, whales often move directly between tokens, seeking the highest chance for a breakout.

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