Bitcoin reached a new all-time high on Friday, hitting $99,655, according to CoinMarketCap. However, altcoins are stealing the spotlight, with many posting double-digit gains.
XRP surged 30% to $1.62 before correcting to around $1.30.
Cardano (ADA) jumped 24%.
Chainlink (LINK) gained 25%.
Stellar (XLM) nearly doubled, reaching $0.63 before dropping back to $0.47.
Altcoins Outperform as Bitcoin Dominance Declines
Bitcoin dominance recently peaked at 61.5% but has since dropped by three percentage points, reflecting the growing strength of altcoins.
SEC Chairman’s Resignation Fuels Altcoin Rally
The surge in XRP, XLM, and ADA follows the announcement that SEC Chairman Gary Gensler will resign on January 20. This triggered a 2-3 day rally, as these established altcoins—familiar to retail investors—remain relatively "affordable" compared to Bitcoin, which is nearing six figures.
Crypto Derivatives Market Sees Record Open Interest
The Bitcoin futures open interest has hit a multi-year high of 663,000 BTC. Similarly, XRP open interest now stands at 1.78 billion XRP.
Leverage is also at record levels, with Bitcoin's total open interest accounting for over 3% of its circulating supply—far higher than traditional markets like the S&P 500, which typically sees a ratio between 0.5% and 1.5%.
Cash and Carry Strategies Drive Market Dynamics
A large share of Bitcoin futures activity comes from cash and carry strategies, where traders profit from price differences between spot and futures markets.
Estimates suggest at least $6 billion is tied up in these strategies, split between:
$4 billion in DeFi protocols like Ethena
$2 billion in traditional hedge funds
Altogether, this represents at least 10% of the total open interest.
Bitcoin Liquidity and Supply Shock
Bitcoin's liquid supply is rapidly shrinking, a trend historically linked to major bull runs. Meanwhile, daily liquidations in the derivatives market are now in the hundreds of millions of dollars.
Since October, 507,000 BTC have been sold by long-term holders, with an acceleration seen this past week. However, if these coins are being acquired by illiquid entities, it could further constrain supply.
Macroeconomic Factors: EU Growth and Energy Prices
Eurozone Growth: Inflation is easing, with 1.5% GDP growth expected in 2025.
Energy Prices: Declining oil prices are helping keep inflation under control.
Currency Markets: The EUR/USD has hit a 2-year low due to U.S. trade war concerns.
Looking Ahead
The continuation of this altcoin rally depends largely on Bitcoin breaking the psychological $100,000 barrier. If BTC consolidates below this level, we may see a cooling-off period. However, if it breaks through, we could be at the start of a full-fledged altcoin season.