Crypto Test Reveals Broken Bull Market

What to Know:

• Bitcoin’s rally to all-time highs in early 2024 was driven by institutional inflows via ETFs, but this success did not translate to the broader altcoin market.
• The approval of spot Bitcoin ETFs created a “compliance loop,” concentrating capital in regulated products and isolating much of the wider crypto ecosystem.
• XRP, along with other assets that have cleared regulatory hurdles, performed well, highlighting the importance of regulatory clarity for attracting institutional investment and liquidity.

Bitcoin’s ascent to record highs earlier this year painted a picture of a thriving crypto market. However, a closer examination reveals a stark divergence in performance, with a significant portion of the market struggling to keep pace. The approval of spot Bitcoin ETFs in January 2024 acted as a catalyst, creating a “compliance loop” that favored specific assets while leaving others behind.

The ETF Effect and Capital Flow

The introduction of spot Bitcoin ETFs marked a turning point, enabling institutional investors to gain exposure to Bitcoin through regulated channels. This influx of capital drove Bitcoin to new heights, but it also created a divide within the crypto market. SoSoValue’s analysis shows that U.S. Bitcoin ETFs hold approximately $115 billion, significantly dwarfing the $18 billion held by Ethereum ETFs. This concentration of capital in Bitcoin ETFs has limited the flow of funds to the wider altcoin market.

Winners and Losers

The market’s divergence is evident in the performance of different crypto sectors. Centralized finance (CeFi), led by Binance’s BNB, saw substantial gains, while assets like XRP, which have navigated regulatory challenges, also performed well. In contrast, sectors reliant on venture capital and retail speculation, such as Layer-2 networks, GameFi, and NFTs, experienced significant declines. This highlights a shift away from speculative investments towards assets with clear regulatory frameworks and established use cases.

The Decline of Venture Capital Narratives

The traditional model of venture capital-backed projects with high valuations and token unlocks has faced challenges. SoSoValue points to the collapse of the “VC cabal – tech narrative – high valuation financing” model, where constant token unlocks from early backers met zero new demand. This has led to a decline in the performance of many altcoins that relied on this model for growth.

Meme Coins as Harvesting Machines

Even meme coins, traditionally a haven for retail investors, have become “highly efficient ‘harvesting machines'” driven by celebrity and political endorsements. While the meme coin sector initially showed promise, it experienced a sharp decline in 2025, indicating that this area of the market is now dominated by short-term pumps and dumps rather than sustainable growth.

Bitcoin’s Retreat and Market Realities

Bitcoin’s retreat from its October high reflects the absence of a vibrant altcoin ecosystem to sustain momentum. The bull market’s riches were not shared; they were funneled into a narrow corridor, leaving the rest of the market to question what comes next in an era that’s slowly being defined by rigor over rumor.

In conclusion, the crypto market has undergone a significant transformation, with the approval of spot Bitcoin ETFs creating a divide between assets that attract institutional capital and those that rely on retail speculation. Regulatory clarity and established use cases are becoming increasingly important factors for success in this new market environment. XRP’s performance, in particular, underscores the importance of regulatory compliance for attracting institutional investment and enhancing liquidity.

Related: Crypto XRP Signals Positive Funding Rate

Source: Original article