Wintermute Warning: The Shanzhai Season is Over, Market Liquidity is Fully Returning to Bitcoin and Ethereum

Global leading crypto market maker Wintermute issues a clear warning in its latest market report: the anticipated broad rally of altcoins (the so-called “Altcoin Season”) has already ended. The report points out that market liquidity is thin at year-end, retail investors are withdrawing from altcoins, and funds are rotating back into core assets like Bitcoin and Ethereum. Meanwhile, massive token unlocks continue to suppress market risk appetite, causing altcoins to fall into a “hopeless rally” dilemma. Although traditional financial institutions are still entering to provide medium-term support, a market consensus is forming—that Bitcoin must first regain strength, and only then can risk appetite safely spread to small-cap tokens. This structural shift may mark the transition of the crypto market from retail speculation-led to a new paradigm dominated by institutional capital allocation.

Market Alert: Why Does Wintermute Assert that “Altcoin Season” Is Over?

As the crypto market consolidates in a sideways pattern amid light trading at year-end, a report from top market maker Wintermute has poured cold water on investors expecting a “Christmas rally.” The core conclusion of the report is direct and stark: the broad altcoin bull market (the so-called “Altcoin Season”) that was expected to follow Bitcoin’s strength has already been quashed. This judgment is not based on short-term price fluctuations but stems from keen insights into deep market fund flows and participant behavior.

According to Wintermute’s internal fund flow data, a significant trend is emerging: aggregated buying pressure is returning to major assets like Bitcoin and Ethereum. More notably, retail traders are withdrawing from various altcoins and reallocating funds into Bitcoin and Ethereum. This rotation aligns with a growing market consensus that, in a new cycle, Bitcoin must lead the market higher first, and then risk appetite can safely cascade down the market cap curve. However, the current environment is characterized by persistent thin liquidity, as many proprietary trading desks have scaled back operations before year-end, leading to volatile and directionless market movements.

Weak market data supports this judgment. Over the past 24 hours, the broader crypto market continued its decline, with Bitcoin down 1.12% below $87,000, and Ethereum down 1.5% near $3,000. Some altcoin sectors suffered even heavier losses, such as the NFT sector, which fell over 9%. All these indicate that short-term risk appetite is scarce, dominating trading activity. Perpetual contract open interest sharply declined overnight (Bitcoin down $3 billion, Ethereum down $2 billion), and although leverage has decreased, the market has become more sensitive to sharp volatility.

Current Key Risk Indicators in the Crypto Market

• Capital Flows: Retail funds are rotating from altcoins into Bitcoin and Ethereum.
• Market Sentiment: Short-term risk appetite is extremely weak, with NFT sectors dropping over 9% in a single day.
• Leverage Levels: Open interest in Bitcoin and Ethereum perpetual contracts plummeted by $50 billion overnight, reducing market liquidity.
• Macro Pressure: Token unlock schedules continue to exert supply-side pressure, suppressing price rebounds.

Double Kill: How Liquidity Shortage and Token Unlocks Kill Altcoins

Altcoins are in trouble not due to a single factor but facing a dual squeeze from market and project sides. The first pressure comes from the macro environment. As year-end approaches, global market liquidity generally tightens, and the crypto market is no exception. Trading platforms and market makers are shrinking their discretionary trading desks, leading to deteriorated market depth, where any price movement in either direction becomes abrupt and volatile due to insufficient buy/sell orders. Wintermute notes that, despite ongoing intense downward volatility, rapid deleveraging has cleared leverage, and capital is retreating into the most liquid assets (Bitcoin and Ethereum), making these fluctuations increasingly “self-limiting.”

In this liquidity migration, Bitcoin and Ethereum serve as “main risk absorbers,” while the broader market struggles under supply pressure and limited risk appetite. Throughout the sell-off, the funding rates and basis (futures vs. spot price difference) of major coins remain relatively compressed, indicating that the market is not experiencing extreme panic selling but rather a calm, structural withdrawal. Meanwhile, options markets continue to price various possible outcomes, with implied volatility remaining high, highlighting market uncertainty about future directions.

The second, more persistent pressure comes from massive token unlocks by project teams. The period from late 2025 to early 2026 marks a peak for many crypto projects’ token unlock schedules. A large volume of previously locked tokens flood into circulation, creating ongoing selling pressure. For a fragile market already lacking new capital inflows, this continuous supply increase is disastrous. It ruthlessly suppresses any rebound attempts, as each price rise attracts holders of unlocked tokens to sell and realize profits. This fundamental supply-demand imbalance traps many altcoins in a “easy to fall, hard to rise” vicious cycle, completely extinguishing market expectations of “Altcoin Season.”

Structural Shift: From Retail Frenzy to Institutional Allocation—A New Market Paradigm

Wintermute’s warning and the current market weakness reveal a deeper, ongoing structural change: the dominance of the crypto market is shifting from retail speculation to institutional investment. Jocy, founding partner of IOSG, recently pointed out that 2025 will be a year of accelerated institutionalization in crypto, with the market seemingly underperforming but actually experiencing “the largest supply turnover and strongest institutional allocation willingness.” Retail investors are exiting, while institutions are continuously building positions.

This paradigm shift explains why the logic of “Altcoin Season” may become invalid. Past altcoin bull markets were largely driven by retail investors’ heightened risk appetite and rapid “hot money” flows. However, the behavior patterns of incoming institutional funds differ fundamentally. Whether through ETFs, corporate treasury allocations, or national strategic reserves, their primary characteristics are risk aversion and a pursuit of regulatory clarity. They naturally prefer the most liquid, largest market cap assets with the lowest regulatory uncertainty—namely Bitcoin, followed by Ethereum.

CoinEx Research chief analyst Jeff Ko’s forecast aligns with Wintermute’s observations. He predicts that by 2026, market liquidity will be highly concentrated in blue-chip crypto assets like Bitcoin and Ethereum, with most altcoins left behind, making a traditional “Altcoin Season” unlikely. This is not a pessimistic view on innovation but a realistic acknowledgment: in a new cycle, capital will be more selective, flowing only into projects with solid fundamentals, clear business models, and strong institutional backing. Altcoins lacking substantive value and driven solely by narratives will find it difficult to gain widespread liquidity again.

Therefore, the current market conditions should perhaps not be simply viewed as a “bull top,” but rather as an “institutional accumulation phase.” Institutional investors continue to buy at relatively “high levels,” focusing not on short-term prices but on long-term asset allocation cycles and store-of-value logic. This slow and steady buying will not generate the explosive rallies driven by retail speculation, but it will help build a more solid and durable market bottom.

Outlook for 2026: A New Pattern Led by Bitcoin with Limited Opportunities

Faced with the declaration that “Altcoin Season is dead,” investors inevitably ask: where are the opportunities in 2026? Based on outlooks from multiple top institutions, the answer remains clear: core opportunities will still revolve around Bitcoin, while altcoin opportunities will shift from “broad rally” to “selective picking.”

Several institutions are bullish on Bitcoin’s performance in 2026. VanEck’s David Schassler notes that Bitcoin has underperformed the Nasdaq 100 index by about 50% this year, which could position it to be the best-performing asset in 2026. K33 Research also predicts Bitcoin will outperform stocks and gold, citing regulatory wins (such as the passage of the “Clarity Act”) and a dovish Fed policy that could create a “liquidity abundance” environment. Galaxy Research provides a wide forecast range, suggesting that by the end of 2026, Bitcoin could reach either $50,000 or $250,000, reflecting the market’s enormous potential amid high uncertainty.

In the context of Bitcoin’s increasing dominance, altcoins are not without opportunities, but their return logic will fundamentally change. The broad rally will be difficult to replicate; opportunities will be highly concentrated in two directions: first, in blue-chip ecosystem core assets deeply aligned with mainstream institutional narratives, such as project tokens playing key roles in stablecoins, real-world asset tokenization, enterprise blockchain, etc.; second, in protocols that can demonstrate verifiable revenue and sustainable business models. As Galaxy’s report predicts, by 2026, the ratio of application-layer revenue to network-layer revenue will double, with the “fat application theory” continuing to lead. This means tokens of applications capable of capturing real economic value, not just hype expectations, will stand out.

For investors, current strategies need significant adjustment. Blindly chasing small-cap, highly volatile altcoins could entail huge risks. A wiser approach is to allocate a core portion of the portfolio (e.g., over 70%) into Bitcoin and Ethereum to capture the mainstream upside driven by institutionalization. Meanwhile, with a small portion of funds, adopting a “venture capital” mindset, carefully researching and selectively investing in projects within key trend sectors with strong fundamentals, is advisable. The game rules have changed; only by adapting from a “gambling on fools” paradigm to a “value discovery” paradigm can one survive and succeed in the next crypto cycle.