#CryptoPortfolio#

When Donald Trump won the presidential elections last November, the political scenario in the US changed in favor of the cryptocurrency industry. As expected, the Trump administration put forth various policies supporting crypto. Since November 5, 2024, the price of Bitcoin has recorded an increase of approximately 22. However, the same level of gains was not seen in altcoins.
Altcoins are trying to keep up with Bitcoin, but...
While Bitcoin has been achieving strong gains, the altcoin market has only risen by 14% during the same period. Over the past 12 months, some major altcoins have faced tough times. Leading altcoin Ethereum dropped by 53.8%, while its competitors Solana and Cardano saw declines of 17.1% and 6.7% respectively. The original meme coin Dogecoin, on the other hand, declined by 1.6%. As altcoins lag behind, it's time to analyze why they are lagging and when a potential rally could occur.
Factors that can boost altcoins
According to experts, several important factors can provide a comeback for the altcoin market:
Donald Trump's crypto-friendly stance: The administration continues to implement crypto-friendly policies, which could eventually support altcoins.
Upcoming spot ETF launches: The upcoming launches of Solana, XRP, and Litecoin spot ETFs are expected to increase market interest.
The impact of tariff policy. Trump's recent tariff increases on China, Canada, and Mexico may affect market sensitivity.
Recession fears: With the US experiencing two consecutive quarters of negative GDP growth under the Biden administration, economic uncertainty could impact investor behavior.
The main problem in the cryptocurrency market: Tight liquidity!
Despite these potential catalysts, crypto analyst VirtualBacon argues that none of these factors are responsible for the stagnation in the altcoin market. Instead, he emphasizes the tight liquidity conditions in the US as the primary reason. According to VirtualBacon, three main factors are consuming liquidity:
1. Fed's Quantitative Tightening (QT)
Instead of injecting money into the economy, the Fed is shrinking its balance sheet. This means they are selling off assets or allowing them to mature without reinvesting, effectively withdrawing money from the financial system.
2. Reverse Repo Opportunity Exhausted
The Reverse Repo Facility, which previously provided cash reserves for financial institutions, has run out. This situation is limiting the liquidity available in a broader market.
3. Low U.S. Treasury General Account
A decrease in the balance in the U.S. Treasury's general account means that the government has less money to spend and further reduces the cash circulating in the system.
VirtualBacon also draws attention to an upcoming debt maturity crisis in 2025. The US government needs to refinance its debt, but if liquidity remains tight, there may not be enough buyers. Fed may need to intervene to prevent a funding crisis:
The Termination of Quantitative Tightening (QT).
Injecting liquidity into banks.
Purchase of US Treasury Bonds.
When will altcoins rally in the cryptocurrency market?
VirtualBacon projects that if the Fed does not provide liquidity until this quarter, the financial system could come under serious stress. However, when liquidity conditions improve, a late-cycle altcoin rally is likely. Although the current stage is challenging, investors who position themselves wisely now can achieve significant gains when the market turns.