Holding altcoins at this point is clearly a high-risk strategy. The risk of further capital loss—especially in low-market-cap projects that have been declining since 2023—still exists. And not only does it exist, but key market parameters suggest that this risk remains elevated.
The purpose of this weekly post is to explain why I think this is the case, using several concrete examples from my market analysis and current macro conditions.
I am not a professional investor. I am a retail investor who has made dozens of investment mistakes over the years. What I try to do, however, is to analyze each mistake carefully and use it to become a better investor over time.
If you are also looking for fresh, data-driven perspectives on the digital asset market, I believe that over the next ten minutes you may find at least one idea or insight worth considering for your own strategy.
Without further delay, let’s begin.
Global Liquidity Index (GLI)
An expansion in global financial system liquidity has been the most important driver of growth in both crypto and equity markets over the past 20 years.
Rising liquidity usually marks the beginning of a new business cycle. It is most often associated with lower interest rates and easier access to credit. When borrowing becomes cheaper, more capital becomes available. Since yields on safer assets are lower in such environments, capital tends to flow into more volatile and risk-heavy investments, where potential returns are higher and the opportunity cost of risk is reduced.
Without these conditions, investors are generally less willing to allocate capital to risky assets.
As of November, the year-over-year growth in liquidity across the world’s ten largest economies stood at approximately 6.5%, representing a mild slowdown compared to July, when YoY growth was around 8.2%.
Although global liquidity is still increasing, the pace of this growth is not strong enough to trigger an altcoin season comparable to 2020. At that time, liquidity growth exceeded 15% YoY, reaching those levels within just a few consecutive months.
ISM Composite Index
The ISM Composite Index is one of the most reliable indicators for understanding where we currently are in the business cycle. It is published monthly by the Institute for Supply Management and is based on surveys conducted with management teams from over 400 U.S. companies.
In simple terms:
Readings below 50 indicate economic contraction
Readings above 50 typically signal economic expansion
Beyond absolute levels, the trend of the index provides critical additional context.
Economic growth and liquidity are closely connected, as many companies—especially smaller and higher-risk ones—depend on credit to survive and expand. When borrowing conditions are favorable, companies invest more. Strong ISM readings generally reflect healthier corporate activity, which in turn supports higher valuations.
Although altcoins are not traditional companies, their performance has historically been highly correlated with business cycle dynamics.
At present, the ISM Composite stands at 51.5 and has been moving sideways within a range of roughly 49–53.5 for nearly three years (since December 2022). This sideways movement, combined with readings barely above 50, is not sufficient to initiate an altcoin season.
For context, the 2020 altcoin cycle began roughly four months after ISM surged sharply from 41.7 to 56.7, following aggressive QE and interest rate cuts to zero by the Federal Reserve.
Federal Reserve and Interest Rates
The current Federal Funds Rate is approximately 3.6%, while the real interest rate stands near 0.8%.
Both values are historically associated with non-altcoin-season conditions. Past data suggests that strong altcoin cycles typically require real interest rates to fall below 0%, ideally while also trending downward.
This can occur in two ways:
A sharp reduction in nominal interest rates by the Fed
Moderate rate cuts combined with a significant rise in inflation
The first scenario appears unlikely unless a major crisis emerges. The second scenario is also problematic, as rising inflation would likely force the Fed to tighten policy again, potentially suppressing risk assets.
Based on forward guidance from recent FOMC communications, the Fed does plan to cut rates gradually over the next two years, largely due to rising unemployment risks. However, these cuts are expected to be modest, with policy rates projected to be around 3% by 2027—only about 0.6–0.7 percentage points lower than today.
This strongly suggests that an altcoin cycle similar in magnitude to 2020 is unlikely in the near term.
DXY (U.S. Dollar Index)
Since January 2025, the DXY has been in a downtrend. In April, it broke below a key support level near 100 and has since been trading within a range between 96 and 102.
This development is generally positive for risk assets, as a weakening dollar often coincides with capital flows into riskier asset classes.
Whether this trend continues remains to be seen. However, it is worth noting that the U.S. government has a strong incentive to maintain a weaker dollar to manage its rapidly growing debt burden, which currently stands at approximately $36.2 trillion.
Indicator Synthesis
When combining all of the indicators discussed above, the conclusion is clear: the market has not yet entered a full risk-on regime.
A broad and sustained rally in smaller crypto projects would require a meaningful shift in these macro conditions. It is also uncertain whether a liquidity environment comparable to 2020 is even achievable again without a significant crisis forcing the Fed into aggressive easing.
Risk-On Environment Score (Denomos)
To simplify the interpretation of these indicators, we at Denomos developed a Risk-On Environment Score that aggregates the factors discussed in this post. Historically, this score has proven to be a reliable signal.
The current score stands at 61.53, showing a mild upward trend since January 2025. However, historical data indicates that the most favorable entry points for altcoins occurred when the score exceeded 80.
This provides additional confirmation that current conditions are not yet supportive of broad exposure to high-risk crypto assets.
My Portfolio (At the Moment)
At present, my portfolio consists of 100% Bitcoin.
If and when conditions align for the beginning of a genuine altcoin cycle, I will openly communicate that in future posts.
Since I plan to share my portfolio performance publicly on Substack going forward, I will track performance starting from this first post. As of today, the portfolio is fully allocated to BTC, with an entry price of $88,336.
The long-term objective is to achieve approximately 30% annualized returns, while documenting the entire process transparently here.
Closing Words
This brings us to the end of my first post. As someone new to writing, I can honestly say that publishing the first piece was not easy.
I would be genuinely interested in hearing your perspective:
Have we already seen the crypto bull run many were waiting for?
Is a broader bear market ahead?
Or is there another indicator you consider more important than those discussed here?
Until the next post, thank you for your time and attention. :)
P.S. Merry Christmas and happy holidays to everyone celebrating. 🎄