Key Insights
- The crypto market is currently in a correction phase, with the altcoins taking the worst hit.
- Some of the factors that caused the slow start to the year include the issues with USDT in Europe, as well as treasury yields and labor market data.
- The altcoin market is currently consolidating and could be at the best time for accumulation.
- Investors should focus on long-term strategies and expect the markets to return to action soon.
The crypto market recently experienced a correction, with many altcoins crashing in price.
This has sparked questions about what lies ahead for 2025. Will the market finally see the long-awaited bull run?
Let’s see some of the factors shaping the crypto industry and what investors can expect this year, according to Michael van de Poppe.
The USDT Controversy.
One of the major factors that has caused unrest within the industry in 2025, is the lack of availability of USDT (Tether) in Europe.
This ban resulted from Tether’s alleged non-compliance with new Markets in Crypto-Assets (MiCA) regulations and led to fears of an altcoin market crash.
However, these fears proved to be unfounded at the end of the day.
Despite a (relatively) small dip of around $5 billion in USDT’s market cap—which was around a 3-4% decline, the broader crypto market remained relatively stable.
Most exchanges continued to offer the stablecoin and the panic quickly subsided after 1 January.
Macro Factors Impacting Crypto.
On the flip side, the U.S. economy has seen significant developments in recent months.
Trump’s remarks about high interest rates echo his previous comments from 2017 about the dollar being too strong.
Back then, his presidency coincided with a drop in the dollar index, which indirectly benefited the crypto industry.
The 10-year Treasury yield has climbed over 30% since September of last year.
It is now near the 5% mark, which is a near-record high.
In addition, the the dollar currency index (DXY) has been at its strongest in the last three years.
All of the above are great news for the US dollar, but bad for crypto because a strong dollar can weaken the value of non-dollar assets.
Labor Market Data and Economic Growth.
The labor market has also been surprisingly resilient this year.
Job openings beat analyst expectations at 8.1 million, and PMI data also came in stronger than forecasted.
While these figures indicate a robust economy, they also contribute to rising yields and create headwinds for crypto.
Looking ahead, the Federal Reserve’s framework is big on keeping unemployment within certain bounds.
This means that If unemployment rises significantly, it could trigger falling yields and a weaker dollar.
A weaker dollar, in this case, could benefit the crypto and altcoin markets.
The Correlation Between Yields and Altcoins.
The relationship between yields and altcoins has grown more evident in recent months.
For example, Ethereum’s performance compared to Bitcoin’s had similar movements in the 10-year yield.
When yields rise, Ethereum tends to lose ground against Bitcoin. The same happens vice versa.
This correlation shows the importance of macroeconomic factors in crypto market trends.
A decline in yields could signal the start of a new altcoin rally. However, the market will remain in a consolidation phase until that happens.
Altcoin Season—The Calm Before the Storm?
The broader altcoin market, represented by the Total3 index is currently in a consolidation phase.
Prices are currently range-bound with no significant upward movement, and this period of stability could be the best opportunity for investors to stack up Bitcoin before the next altcoin season.
Altcoins like Optimism have remained within a defined range since mid-last year.
Many others are at cycle lows against Bitcoin, indicating that they could be primed for a price explosion if the market conditions improve.
Another standout in recent months has been the Virtual Protocol.
This protocol is an AI-focused project that achieved a staggering 100x growth since its launch.
Its rise and price action have been very similar so far, to that of XRP’s historic runs, and could be a goldmine.
However, investors should be cautious with such explosive gains.
When entering the altcoin market, a 40% correction could present a bounce-back opportunity for day-traders.
Long-term investors, on the other hand, might wait for an 80% correction before entry.
What Lies Ahead for 2025?
The crypto market’s trajectory in 2025 will depend on several factors.
Some of these include interest rates and dollar strengths, where lower rates and a weaker dollar would create favorable conditions for altcoins.
Another is signs of economic slowdowns, which could trigger policy changes that benefit crypto markets.
Finally, the current crypto landscape is defined by consolidation, macroeconomic uncertainty, and pockets of opportunity.
There have been no significant changes in the recent months.
However, investors should focus on long-term strategies and prepare for better market movements in 2025!