Altcoin struggles have dominated the cryptocurrency market, with Ethereum (ETH) leading a significant downturn that has pushed several top cryptocurrencies below crucial price levels. Market analyst CyrilXBT has been actively discussing these challenges, shedding light on potential recovery scenarios by 2026.
Bitcoin Dominance and its Impact on Altcoin Struggles
CyrilXBT explains that when Bitcoin (BTC) dominance rises, capital tends to concentrate around Bitcoin, making it a safe haven for investors. This shift causes altcoins to become liquidity sources instead, compressing risk prior to any potential expansion. Such patterns have been observed in past market cycles before altcoins regain their strength.
Tax-Loss Harvesting and Altcoin Struggles
Another factor contributing to the current altcoin struggles is tax-loss harvesting. Unlike equities and gold, cryptocurrencies have witnessed declines since January 1st. To minimize losses before the year-end, funds are selling unprofitable altcoins and other high-risk assets. CyrilXBT expects this pressure to ease as the new year begins.
Liquidity Lag and the Exhausted Demand Phenomenon
The expert further highlights the lag in liquidity. Although the Federal Reserve has begun injecting liquidity into the system, market reactions are typically delayed. Historically, an improvement in liquidity precedes Bitcoin stabilization, with altcoins trailing. Currently, the market is in this lag phase, awaiting a substantial breakout.
With low volatility, stagnant Bitcoin prices, and declining altcoins, CyrilXBT notes a resemblance to previous cycles, like the early 2019 and early 2023 recoveries. Several factors contribute to the altcoin market drop: increased Bitcoin dominance, peak tax-loss selling, thin liquidity, exhausted demand, and delayed macro liquidity impacts.
Instead of a capitulation scenario, this period seems to represent a compression phase that often precedes significant recoveries. CyrilXBT’s insights suggest that these altcoin struggles might just be the precursor to a robust revival by 2026.
