Original Title: Capital Concentration in an Expanding Crypto Universe
Original Author: Tanay Ved, CoinMetrics
Translated by Luffy, Foresight News
TL;DR: Please provide the content you would like me to translate from
The landscape of crypto investment continues to expand, yet the range of assets that capital can choose from is becoming increasingly narrow. Bitcoin's market dominance is on a continuous upward trend, while the growth of stablecoins and on-chain derivatives is steadily squeezing the market space of altcoins. The altcoin market is shrinking, with a significantly enhanced concentration among top-tier projects: currently, the top ten altcoins account for approximately 82% of the total market capitalization of the altcoin sector, a significant increase from 70% five years ago. Since 2023, large-cap cryptocurrencies have significantly outperformed mid- and small-cap tokens; post-volatility capital flows have further reinforced investors' preference for high-liquidity, well-established leading assets.
The landscape of crypto investments continues to expand. Hundreds of new tokens launch each year, the number of stocks involved in digital asset-related businesses keeps growing, and tokenization technology is gradually bringing traditional assets like stocks and commodities onto the blockchain. However, as investment options become increasingly diverse, market capital is also becoming more selective.
Bitcoin's market dominance has rebounded to around 65%, reaching its highest level since early 2021. Meanwhile, the market capitalization of stablecoins and on-chain derivatives (such as wrapped tokens, staking tokens, cross-chain bridge tokens, etc.) has approached 12.5% of the total cryptocurrency market capitalization. As a result, altcoins are facing a double squeeze—despite the growing number of tokens, their overall market share is shrinking.
This issue of the "State of the Crypto Market" report will explore whether the crypto market is undergoing a structural shift toward capital centralization. We will analyze trends in market dominance and performance across assets of different market capitalization tiers and sectors to investigate whether capital is increasingly concentrating in fewer, larger, and more mature tokens—or if investment opportunities remain broadly distributed.
Evolution Trend of Market Dominance Rate
First, we begin our analysis with market capitalization dominance. Bitcoin's market cap dominance (i.e., the proportion of Bitcoin's market capitalization relative to the total market capitalization of the entire cryptocurrency market) rose to 65% in 2025, reaching a new high since 2021. Notably, this growth was not a short-term surge, but rather a long-term, steady increase that began after hitting a low in 2022.
The launch of Bitcoin spot ETFs has deepened the institutionalization process, attracting over $150 billion in long-term capital. This has further driven the continuous increase in Bitcoin's market capitalization dominance. This trend has reinforced Bitcoin's positioning as a "safe-haven asset" in the cryptocurrency market and has also established it as a high-liquidity, standardized entry point for traditional institutional investors into the crypto space. Compared to previous bull markets, where "altcoin seasons" quickly diluted Bitcoin's market share, Bitcoin's dominant position in this cycle demonstrates greater sustainability.
Bitcoin Dominance Rate, Data Source: Coin Metrics
The structure of other assets in the cryptocurrency market is also undergoing transformation. Stablecoins with a market capitalization exceeding $300 billion, as well as on-chain derivatives, are increasingly occupying a larger share of the total market capitalization. These types of tokens serve different functions within the crypto ecosystem: stablecoins act as the primary medium of exchange in the market, while on-chain derivatives provide investors with rights to returns on underlying assets or avenues for generating income.
Cryptocurrency Market Dominance Distribution, Data Source: Coin Metrics
Affected by this trend, the altcoin market is facing a dilemma. The range of investable assets is continuously narrowing, and a concentration effect among top-tier projects is becoming increasingly evident. Market value is steadily consolidating toward assets with higher liquidity and more mature development. These assets typically feature clear use cases, well-defined regulatory development paths, and significant benefits from the growing trends in stablecoins, decentralized finance (DeFi), and asset tokenization.
Unlike previous market cycles, the current capital rotation from major cryptocurrencies to altcoins is significantly slower. ETFs and various institutional investment tools have tightly locked market liquidity into top-tier assets. However, as general listing standards are implemented, and as altcoin and multi-asset ETFs expand investment channels for larger-cap altcoins, combined with progress in legislation related to market structure, this market dynamic may soon shift.
The "Dominance Trend of Giants" Within the Altcoin Sector
Even within the altcoin sector, the trend toward capital centralization is intensifying. Currently, the top ten altcoins (excluding Bitcoin) account for about 82% of the total market capitalization of the sector, a significant increase from 64% during the 2021 bull market. During the previous bull market, numerous small-cap altcoins that briefly generated value have gradually exited the market. In their place, a sector structure with a stronger concentration of value at the top has emerged. Additionally, the lifecycles of various short-term market narratives are continuously shortening, making it increasingly difficult to sustain prolonged asset value appreciation.
Top 10 Meme Coins Market Cap Share, Data Source: Coin Metrics
We can also observe this centralization trend by looking at the number of tokens that have crossed certain market capitalization thresholds. Although the total market capitalization of the crypto market has repeatedly hit new all-time highs, the number of altcoins with a market cap exceeding $1 billion has dropped from about 105 at the peak in 2021 to approximately 58 currently. This means that even as the total amount of assets in the market increases, the number of altcoins that are truly "investable" is continuously decreasing. While this does not necessarily indicate that the altcoin sector is in decline, it does suggest that market capital may increasingly focus on projects with stronger fundamentals and better risk resistance.
Number of Meme Coins with a Market Cap Exceeding $1 Billion, Data Source: Coin Metrics
The table below summarizes the annual evolution of the aforementioned market trends. Some indicators still exhibit cyclical characteristics—for example, Bitcoin's market dominance declines during bull markets and rises during bear markets. However, the market share of the top ten altcoins by market capitalization has shown a different trend: from 2020 to 2024, this ratio remained consistently stable between 69% and 73% regardless of market conditions. However, in 2025, it sharply increased to 82%. This change indicates a structural shift in the market toward more mature, leading assets, rather than merely short-term behavior of chasing high-quality assets during price rallies.
Data Source: Coin Metrics
Funds flowing into major cryptocurrencies
This trend of capital centralization is also reflected in the performance of asset returns. Since 2023, mid-cap coins (market cap of $10 billion to $100 billion), especially small-cap coins (market cap under $10 billion), outperformed large-cap coins (market cap over $100 billion) during both early and late stages of 2024. However, this trend sharply reversed in 2025, primarily due to a rapid decline in market sentiment toward Meme coins and other short-term narrative rotations.
When calculated with equal weighting, from January 2023 to the present, the overall return of major-cap cryptocurrencies has been approximately 365%, while mid-cap and small-cap cryptocurrencies have returned only about 70% and 55%, respectively, with most of their previous gains reversed. This phenomenon of diverging returns clearly indicates that market performance is increasingly favoring more mature and liquid assets. The price increases of small-cap tokens struggle to replicate the sustainability seen in previous market cycles.
Market Performance of Tokens with Different Market Capitalization Sizes, Data Source: Coin Metrics
On October 10, 2025, the market experienced a large-scale liquidation event triggered by high leverage positions and liquidity exhaustion. This event may further reinforce the trend of capital shifting toward defensive assets, with investors increasingly favoring highly liquid assets over small-cap assets, which carry significantly higher volatility.
Conclusion
Various data indicate that the cryptocurrency market is in a phase of structural change, gradual maturation, and moving toward consolidation. Although the number of crypto assets continues to grow, and as an underlying infrastructure, it supports an increasingly diverse range of traditional asset types, the overall liquidity of the market remains limited. At the same time, within diversified investment portfolios, crypto assets must compete for space with popular investment themes in the stock market and traditional safe-haven assets like gold.
Currently, capital is continuously flowing into major cryptocurrencies and infrastructure sectors that support stablecoins, tokenized assets, and decentralized finance (DeFi). The importance of liquidity and scale has increased further, and the barriers for altcoins to attract long-term capital have significantly risen.
Of course, if market structure-related regulations become clearer, stablecoins and multi-asset ETFs continue to gain popularity, and market liquidity improves, it is still possible to see a new "altcoin season." However, it is foreseeable that the beneficiaries of this altcoin cycle will be more concentrated, and capital will be more selective than in any previous cycle.
Click to learn about BlockBeats' job openings.
Welcome to join the official Lulin BlockBeats community:
Telegram Subscription Group:https://t.me/theblockbeats
Telegram discussion group:https://t.me/BlockBeats_App
Official Twitter account:https://twitter.com/BlockBeatsAsia