Capital Flight: Why Do People Only Dare to Buy Bitcoin and Avoid Small Coins?

The choice of capital is becoming more and more selective than ever before.

The landscape of the crypto world is expanding, with hundreds of new tokens emerging every year, and traditional assets are also being tokenized and gradually brought onto the chain. However, a clear trend is that funds are retreating from the vast wilderness and concentrating into a few solid fortresses.

The most prominent signal comes from $BTC. Its market dominance, that is, its market capitalization as a proportion of the total crypto market value, has risen back to around 65%, the highest level since early 2021. This is not a short-term rebound but a long and steady upward curve since hitting bottom in 2022.

The core force driving this trend is long-term institutional capital, over $150 billion flowing in through spot ETFs. This fundamentally reshapes the role of $BTC: it is no longer just a speculative tool but a high-liquidity, regulated entry point for traditional markets into the crypto space, widely recognized as a “digital safe-haven asset.”

Unlike previous bull markets, $BTC’s dominance appears more resilient this time. The scene of a “altcoin season” with a hundred flowers blooming and rapidly diluting the leader’s share has not reappeared.

Besides $BTC, two other asset classes are quietly eroding market share: stablecoins and on-chain derivatives. Their total market cap share has approached 12.5%. Stablecoins are the main trading medium within the ecosystem, while various derivative tokens provide yield rights or income channels on underlying assets.

Altcoins, therefore, are caught in a double squeeze. Although the total number of tokens is increasing, their overall market share is shrinking. The investable range remaining is becoming narrower and narrower.

This concentration is even more alarming within the altcoin space.

Currently, the top ten altcoins by market cap (excluding $BTC) account for about 82% of the entire altcoin sector. This figure was around 64% during the 2021 bull market. The previous cycle saw the gradual disappearance of many small-cap coins, and the monopolistic effect of top assets has become unprecedentedly strong.

A more intuitive data point is: despite the crypto total market cap reaching new highs, the number of altcoins exceeding $1 billion in market cap has sharply decreased from about 105 at the peak in 2021 to around 58 now. The market is growing larger, but “investable” options are decreasing.

Capital preferences are directly reflected in returns.

Since January 2023, the overall return of large-cap crypto coins (market cap over $10 billion), calculated equally weighted, is about 365%. In comparison, mid-cap coins ($1 billion to $10 billion) have returned only about 70%, while small-cap coins (less than $1 billion) have about 55%.

Small-cap assets briefly outperformed in early and late stages of 2024, but this trend sharply reversed in 2025. Market enthusiasm for Meme coins and short-term narratives quickly faded, and funds unhesitatingly flowed back into safer, more liquid assets.

The large-scale liquidation event on October 10 last year, triggered by high leverage and liquidity exhaustion, served as a stress test and likely further reinforced this “safe-haven” mentality. Investors will become more cautious of highly volatile small-cap assets and instead embrace giants that offer more certainty.

All data points to the same conclusion: the crypto market is undergoing a structural shift toward maturity and consolidation.

As an underlying infrastructure, it can support increasingly diverse asset types, but the total market liquidity remains limited. Crypto assets not only compete internally but also compete externally with popular stock sectors, gold, and other traditional safe-haven assets for capital.

Currently, capital continues to flow toward $BTC and other large-cap crypto coins, as well as the core infrastructure supporting stablecoins, DeFi, and asset tokenization. The importance of liquidity and scale has reached an unprecedented level. Altcoins aiming to attract long-term capital face significantly higher thresholds.

Of course, the future is not set in stone. If regulatory rules targeting market structure become clearer, and multi-asset ETFs become widespread, coupled with an overall improvement in liquidity conditions, a new “altcoin season” could still be triggered.

But it is foreseeable that even when that day arrives, the beneficiaries will be even more concentrated. Capital choices will be more selective and frugal than in any previous cycle in history.

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