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

The S&P 500 and Nasdaq-100 gained roughly 17% in 2025 while the CoinDesk 80 altcoin index fell 40% and small-cap alts dropped 30%.What does it mean for the next cycles 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 80s -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.