Why Altcoin Season Peaks But Investors Still Struggle to Profit

Analyses and data indicate that the crypto market is experiencing its most active altcoin season since early 2025, with many altcoins outperforming Bitcoin. However, behind this excitement lies a paradox. Most retail investors remain uneasy as their portfolios show little to no profit.

This article outlines the main reasons behind this situation.

Altcoin Market Cap Rises but Dominance Shrinks

TradingView data shows that the TOTAL3 market cap (excluding BTC and ETH) reached a new high of over $1.1 trillion in September.

Yet the share of OTHERS (excluding the top 10) has declined since 2022, now standing at just 8%.

OTHERS Dominance And TOTAL3 Capitalization. Source: TradingView.

In past cycles, such as 2017 and 2021, TOTAL3 and OTHERS.D rose together. That trend reflected capital flowing not only into large-cap altcoins but also into mid-cap and low-cap ones.

The current divergence shows that capital is concentrated in stablecoins and a handful of top-10 altcoins such as SOL, XRP, BNB, DOG, HYPE, and LINK. Smaller altcoins receive far less liquidity, making it hard for their prices to return to levels where investors previously bought. This creates a situation where only a few win while most face losses.

Retail investors also tend to diversify across many coins instead of adding size to top altcoins. That explains why many portfolios remain stagnant despite a broader market rally.

“Position sizing is everything. Many people hold 25–30 tokens at once. A 100x on a token that makes up only 1% of your portfolio won’t meaningfully change your life. It’s better to make a few high-conviction bets than to overdiversify,” analyst The DeFi Investor said.

Altcoin Index Surges but Investor Sentiment Remains Cautious

The Altcoin Season Index from Blockchain Center now stands at 80 points. This indicates that over 80% of the top 50 altcoins outperformed Bitcoin in the past 90 days—a clear sign of altcoin season.

However, the Fear & Greed Index is at 52, a neutral level reflecting caution and no clear directional bias.

The Altcoin Season Index & Fear & Greed Index. Source: Blockchain Center & Alternative

Historical data shows that the 2024 rally drove both indicators higher. At that time, the Altcoin Season Index climbed above 75, while the Fear & Greed Index soared past 80, showing extreme greed. The parallel rise reflected investor confidence as capital rotated strongly into altcoins. But that is not happening now.

Retail caution seems to stem from lessons learned in past cycles, where altcoins spiked then collapsed rapidly due to FOMO and mass sell-offs. New factors such as Fed rate decisions, tax impacts, and geopolitical tensions may also contribute to hesitation.

“This isn’t an ‘everyone gets rich’ market anymore. It’s player vs. player, especially with the current macro environment,” analyst Luca emphasized.

The Number of Altcoins Has Increased Tenfold Since 2021

Although the TOTAL3 market cap is near its 2021 peak, the context has changed dramatically. CoinMarketCap reports that in 2025, more than 21 million altcoins will be tracked—100 times more than the roughly 20,000 coins in 2021.

Total Altcoin Tracked. Source: CoinmarketCap

Dune data highlights the token explosion from 2017 to 2025, with unique tokens skyrocketing, especially on Ethereum, Solana, and Base.

This creates a much more selective environment. In 2021, investors could profit more easily with fewer coins because competition was lower. With tens of millions of tokens spanning DeFi, meme coins, and AI tokens, picking the right one is as difficult as finding a needle in a haystack.

“Back in 2021, the altcoin universe was small and almost every coin caught a rally—even the junky ones. Now in 2025, the game has changed. There are hundreds of times more altcoins. With such an oversupply, the odds that your random small-cap will magically 100x are near zero,” analyst Nonzee explained.

Most new tokens fail quickly due to low liquidity, rug pulls, or intense competition. Retail investors, who often spread capital across many small-cap tokens, now face higher risks. This results in either losses or very modest returns, even as the overall market surges.

These three factors explain why the September 2025 altcoin season feels incomplete. To overcome this, investors may need deeper research, a focus on fundamentally strong projects, and a reconsideration of excessive diversification.