Small-cap crypto tokens just hit a humiliating four-year low, proving the “Alt Season” thesis is officially dead

Crypto and stock performance since January 2024 suggests that the new “altcoin trading” is just stock trading.

The S&P 500 returned roughly 25% in 2024 and 17.5% in 2025, compounding to approximately 47% over two years. The Nasdaq-100 delivered 25.9% and 18.1% over the same period, for a cumulative gain near 49%.

The CoinDesk 80 Index, tracking the next 80 crypto assets after the top 20, fell 46.4% in 2025 first quarter alone and sat down roughly 38% year-to-date by mid-July.

The MarketVector Digital Assets 100 Small-Cap Index dropped to its lowest level since November 2020 by late 2025, erasing over $1 trillion from the total crypto market cap.

The divergence is not a rounding error. Broad altcoin baskets delivered negative returns with volatility equal to or higher than equities, while US stock indices posted double-digit gains with controlled drawdowns.

The question for Bitcoin investors is whether diversifying into smaller crypto assets offered any risk-adjusted benefit, or whether it simply added exposure to a negative Sharpe ratio while maintaining equity-like correlation.

Picking a credible altcoin index

For the analysis, CryptoSlate tracked three altcoin indices.

The first is the CoinDesk 80 Index, launched in January 2025, which tracks the next 80 assets after the CoinDesk 20, providing a diversified basket beyond Bitcoin, Ethereum, and the largest names.

The second is the MarketVector Digital Assets 100 Small-Cap Index, which captures the 50 smallest tokens in a 100-asset basket and serves as the “junk end of the market” barometer.

Kaiko's Small-Cap Index, a research product rather than a tradable benchmark, offers a clean sell-side quant lens on the smaller-asset cohort.

Together, these three provide a spectrum: broad alt basket, high-beta micro-caps, and a quantitative research perspective. All three tell the same story.

On the other hand, the equity baseline is straightforward.

Big-cap US indices made mid-20s in 2024 and high-teens in 2025, with relatively shallow drawdowns. The S&P 500's worst intra-year pullback in the period stayed in the mid-teens, while the Nasdaq-100 remained in a strong uptrend.

Both indices compounded returns year over year without giving back meaningful gains.

Broad altcoin indices followed a different path. CoinDesk Indices' report showed the CoinDesk 80 returning -46.4% in the first quarter alone, while the large-cap CoinDesk 20 fell “only” -23.2%.

By mid-July 2025, the CoinDesk 80 sat down approximately 38% year-to-date, while the CoinDesk 5, tracking Bitcoin, Ethereum, and three other majors, gained 12% to 13% over the same period.

CoinDesk Indices' Andrew Baehr described the dynamic to ETF.com as “identical correlation, completely different P&L.”

The CoinDesk 5 and CoinDesk 80 showed a 0.9 correlation, meaning they moved in the same direction, but one delivered low-double-digit gains while the other lost nearly 40%.

The diversification benefit from holding smaller alts proved negligible, while the performance penalty was severe.

The small-cap segment fared worse. Bloomberg coverage of the MarketVector Digital Assets 100 Small-Cap Index noted that by November 2025, the index had fallen to its lowest level since November 2020.

Over the prior five years, the small-cap index returned roughly -8%, versus approximately +380% for its large-cap counterpart. Institutional flows rewarded size and punished tail risk.

Measuring altcoin performance in 2024, Kaiko's small-cap cohort was down over 30% for the year, while mid-caps struggled to keep pace with Bitcoin.

The winners concentrated on a narrow set of large names, such as Solana and XRP. Back then, altcoin trading volume dominance versus Bitcoin climbed back to 2021-era highs, but 64% of alt volume concentrated in the top 10 altcoins.

Liquidity did not vanish from crypto, but moved up the quality curve.

Sharpe ratios and drawdowns

Risk-adjusted returns tilt the comparison further. The CoinDesk 80 and small-cap alt indices delivered deep negative returns with equity-like or higher volatility.

The CoinDesk 80's -46.4% came in a single quarter. The MarketVector small-cap gauge pushed to pandemic-era lows in November after another leg down.

Broad alt indices experienced multiple peak-to-trough moves exceeding 50% at the index level: Kaiko's -30%+ for small caps in 2024, the CoinDesk 80's -46% in the first quarter of 2025, and small-cap indices revisiting 2020 lows in late 2025.

In contrast, the S&P 500 and Nasdaq-100 posted back-to-back 25%/17% total returns with drawdowns in the mid-teens at worst. US equities were volatile but controlled. Crypto indices were volatile and destructive.

Even granting higher volatility for altcoins as a structural feature, their 2024 and 2025 payoff per unit of risk was poor compared to holding US equity indices.

Broad alt indices posted negative Sharpe ratios over the 2024 and 2025 window, while S&P and Nasdaq delivered strongly positive Sharpe ratios before adjusting for crypto's higher volatility. After adjusting, the gap widened further.

Bitcoin investors and crypto liquidity

Liquidity concentration and quality migration form the first implication. Bloomberg and Whalebook coverage of the MarketVector small-cap index emphasized that since early 2024, smaller alts have consistently lagged, with institutional flows channeled into Bitcoin and Ethereum exchange-traded products instead.

Combined with Kaiko's observation that alt volume dominance returned to 2021 levels but concentrated in the top 10 altcoins, the pattern is clear: liquidity moved up the quality curve rather than exiting crypto entirely.

The “alt season” functioned as a basis trade, not structural outperformance. CryptoRank's altseason index surged to approximately 88 by December 2024, then collapsed back to 16 by April 2025, a full round trip.

The 2024 alt season delivered a classic blow-off, but by mid-2025, broad baskets had returned most of their gains, while the S&P and Nasdaq compounded.

For advisors and allocators considering diversification beyond Bitcoin and Ethereum, CoinDesk's data provides a clear case study.

A concentrated large-cap crypto index (CoinDesk 5) gained low teens year-to-date by mid-2025, while the diversified alt index (CoinDesk 80) lost nearly 40%. Yet, the two indices showed a correlation of 0.9.

Investors did not gain meaningful diversification benefit from piling into smaller alts. They accepted vastly worse returns and drawdowns than either Bitcoin/Ethereum or US stocks, while maintaining directional exposure to the same macro drivers.

Capital is treating most alts as tactical trades rather than structural allocations. Spot Bitcoin and Ethereum ETFs offered a significantly better risk-adjusted ride over 2024 and 2025, as did US equities.

Altcoin liquidity is consolidating in a narrow cohort of “institutional-grade” names, such as Solana and XRP, and a handful of others that demonstrated independent catalysts or regulatory clarity. Index-level breadth is being punished.

What does it mean for the next cycle's liquidity

The 2024 and 2025 periods tested whether altcoins could deliver diversification value or outperformance in a risk-on macro environment. US equities posted consecutive years of double-digit gains with manageable drawdowns.

Bitcoin and Ethereum gained institutional acceptance through spot ETFs and benefited from regulatory de-escalation.

Broad altcoin indices lost money, suffered deeper drawdowns, and maintained high correlation to large-cap crypto and equities without offering compensation for the additional risk.

The institutional flows followed performance. The MarketVector small-cap index's five-year -8% return versus the large-cap index's +380% gain reflects capital migrating to assets with regulatory clarity, liquid derivatives markets, and custody infrastructure.

The CoinDesk 80's -46% for the first quarter and subsequent -38% year-to-date performance by mid-July suggest that migration accelerated rather than reversed.

For BTC/ETH investors evaluating whether to diversify into smaller crypto assets, the 2024/25 data provides a clear answer: broad alt baskets underperformed US equities on an absolute basis, underperformed Bitcoin and Ethereum on a risk-adjusted basis, and failed to deliver diversification benefits despite maintaining near-0.9 correlation with large-cap crypto.

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