Written by: Tanay Ved
Compiled by: Luffy, Foresight News
TL;DR
- The crypto investment landscape continues to expand, yet capital's choice of assets is narrowing: Bitcoin's market dominance shows a sustained upward trend, while the growth of stablecoins and on-chain derivatives is continuously squeezing the market space for altcoins.
- The altcoin market is shrinking, with a significantly enhanced concentration effect at the top: The current top ten altcoins by market cap account for about 82% of the total market cap of the sector, a significant increase from 70% five years ago.
- Since 2023, the performance of large-cap crypto assets has significantly outperformed mid-cap and small-cap assets; the flow of funds after market volatility has further reinforced investors' preference for high-liquidity, mature leading assets.
The crypto investment landscape is still expanding continuously. Hundreds of new tokens are launched each year, the number of stock targets related to digital asset businesses is increasing, and tokenization technology is gradually bringing traditional assets like stocks and commodities on-chain. While investment choices are becoming richer, market capital is also becoming more selective.
Bitcoin's market dominance rate has rebounded to around 65%, reaching its highest level since early 2021; at the same time, the market value of stablecoins and on-chain derivatives (such as wrapped tokens, staked tokens, cross-chain bridge tokens, etc.) accounts for nearly 12.5% of the total crypto market capitalization. Therefore, altcoins are facing a double squeeze. Despite the growing number of tokens, their total market share is shrinking.
This issue of the "State of the Network Market" report will explore whether the crypto market is undergoing a structural shift towards capital concentration. We will analyze the trends in market dominance and return performance across different market cap tiers and sectors to investigate whether capital is continuously aggregating towards a smaller number of larger, more mature tokens, or whether investment opportunities remain widely distributed.
Evolution of Market Cap Dominance
First, let's analyze market cap dominance. Bitcoin's market cap dominance (i.e., Bitcoin's market cap as a percentage of the total crypto market cap) climbed to 65% in 2025, hitting a new high since 2021. It is worth noting that this growth is not a short-term burst but a long-term steady upward trend since hitting a low in 2022.
The launch of Bitcoin spot ETFs has deepened the institutionalization process, attracting over $150 billion in long-term capital for it, further boosting the continuous rise in its market dominance. This trend has solidified Bitcoin's position as a "safe-haven asset" in the crypto market and made it a highly liquid, standardized entry point for traditional institutional investors into the crypto market. Compared to previous bull markets where "altcoin seasons" quickly diluted Bitcoin's market share, Bitcoin's dominance in this cycle is more enduring.
Bitcoin Dominance, Data Source: Coin Metrics
The structure of other assets in the crypto market is also changing. Stablecoins with a current market cap exceeding $300 billion, and on-chain derivatives, are accounting for an increasing proportion of the total market capitalization. These tokens serve different functions in the crypto ecosystem: stablecoins are the primary medium of exchange in the market, while on-chain derivatives provide investors with yield claims on underlying assets or channels to generate interest income.
Crypto Market Dominance Distribution, Data Source: Coin Metrics
As a result, the altcoin market is facing a dilemma. The range of investable targets that remain is continuously narrowing, and the concentration effect at the top is becoming more apparent: market value continues to concentrate towards more liquid and mature assets, which often have clear use cases, defined regulatory development paths, and can fully benefit from the development waves of stablecoins, decentralized finance (DeFi), and asset tokenization.
Unlike previous market cycles, the speed of capital rotation from mainstream coins to altcoins has significantly slowed down in this cycle. ETFs and various institutional investment tools have locked market liquidity firmly in top-tier assets. However, with the landing of universal listing standards, the launch of altcoin and multi-asset ETFs broadening investment channels for more large-cap altcoins, coupled with the advancement of market structure-related legislation, this market structure may change.
The "Giant Monopoly" Trend Within the Altcoin Sector
Even within the altcoin sector itself, the trend of capital concentration is intensifying. The current top ten altcoins by market cap (excluding Bitcoin) account for about 82% of the total market cap of the sector, a significant increase from 64% during the 2021 bull market. In the previous bull market, a large number of small-cap altcoins that briefly created value gradually exited the market, replaced by a sector structure with a stronger top effect, and the lifecycle of various short-term market narratives continues to shorten, making it difficult to support sustained increases in asset value.
Top 10 Altcoin Market Cap Share, Data Source: Coin Metrics
We can also observe this concentration trend by looking at the number of tokens that break through specific market cap thresholds. Although the total market cap of the crypto market has repeatedly reached new historical highs, the number of altcoins with a market cap exceeding $1 billion has shrunk from about 105 at the peak in 2021 to about 58 currently. This means that even though the total number of assets in the market is increasing, the number of truly "investable" altcoins is continuously decreasing. While this does not mean the altcoin sector is heading for decline, the focus of market funds may further concentrate on targets with solid fundamentals and stronger risk resistance.
Number of Altcoins with Market Cap Over $1 Billion, Data Source: Coin Metrics
The table below summarizes the annual evolution characteristics of the above market trends. Some indicators still show cyclical characteristics, such as Bitcoin's market dominance falling in bull markets and rising in bear markets, but the market share of the top ten altcoins by market cap has shown a different trend: from 2020-2024, regardless of market conditions, this ratio remained stable at 69%-73%, but it surged to 82% in 2025. This change indicates a structural shift in the market towards mature leading assets, rather than simply short-term "chasing quality assets" behavior.
Data Source: Coin Metrics
Capital Flows to Mainstream Coins
This capital concentration trend is also reflected in asset return performance. Since 2023, mid-cap coins (market cap $1B - $10B), and especially small-cap coins (market cap under $1B), had outperformed large-cap coins (market cap over $10B) in the early and late stages of 2024, but this trend reversed dramatically in 2025, due to the rapid fading of market sentiment towards Meme coins and other short-term narrative rotations.
Calculated on an equal-weight basis, from January 2023 to the present, the overall return of large-cap crypto assets is about 365%, while the returns of mid-cap and small-cap assets are only about 70% and 55% respectively, with most of the earlier gains being given back. This divergence in returns fully illustrates that market performance is increasingly tilting towards developed, liquid assets, and the gains of small-cap tokens are difficult to replicate the sustainability seen in previous cycles.
Market Performance of Tokens by Different Market Cap Sizes, Data Source: Coin Metrics
On October 10, 2025, the market experienced a large-scale liquidation event triggered by high leverage positions and liquidity drying up. This event may further strengthen the trend of capital tilting towards defensive assets, with investors increasingly favoring high-liquidity assets rather than significantly more volatile small-cap assets.
Conclusion
Various data indicate that the crypto market is in a stage of changing格局, gradual maturation, and moving towards consolidation. Although the number of assets in the crypto market continues to increase, and as underlying infrastructure, the types of traditional assets it carries are becoming richer, the overall total liquidity of the market is limited. At the same time, in multi-asset investment portfolios, crypto assets also need to compete for space with popular investment themes in the stock market and traditional safe-haven assets like gold.
Currently, capital is continuously aggregating towards large-cap crypto assets and the infrastructure sectors that support the development of stablecoins, tokenized assets, and decentralized finance. The importance of liquidity and scale has increased further compared to the past, and the threshold for altcoins to attract long-term capital has also risen significantly.
Of course, if market structure-related rules become clearer, altcoin and multi-asset ETFs continue to popularize, coupled with improved market liquidity conditions, it is still possible to trigger a new round of altcoin season. But it can be expected that the beneficiaries of this altcoin season will be more concentrated, and capital's choices will be more selective than in any previous cycle.
