The performance of crypto and stock markets since January 2024 reveals a stark reality: the "altcoin trade" is increasingly resembling stock trading, but with significantly poorer returns.
Altcoin Performance vs. Traditional Markets
In 2024, the S&P 500 saw an increase of approximately 25%, followed by another 17.5% in 2025, resulting in a cumulative profit of nearly 47% over two years. The Nasdaq-100 experienced gains of 25.9% and 18.1% respectively, bringing its total two-year return to roughly 49%.
However, altcoin indices tell a different story. The CoinDesk 80 Index, which tracks the 80 crypto assets following the top 20, plummeted by 46.4% in just the first quarter of 2025 and remained about 38% below its starting level by mid-July. Meanwhile, the MarketVector Digital Assets 100 Small-Cap Index hit its lowest point since November 2020 in late 2025, erasing over $1 trillion from the overall crypto market capitalization.
This divergence is not a statistical anomaly. Broad altcoin baskets generated negative returns, with volatility equal to or greater than that of stocks, while US stock indices maintained double-digit gains with relatively contained corrections.
The pertinent question for Bitcoin investors is whether diversifying into smaller-cap cryptos actually provides risk-adjusted benefits, or simply adds a portfolio with a negative Sharpe ratio that is still highly correlated with stocks.
Key Altcoin Indices
The analysis focuses on three representative altcoin indices:
- CoinDesk 80 Index: Launched in January 2025, it tracks the performance of 80 crypto assets following the CoinDesk 20, representing a diversified basket of altcoins beyond Bitcoin and Ethereum.
- MarketVector Digital Assets 100 Small-Cap Index: Comprises the 50 smallest-cap tokens within the top 100 assets, often considered the "riskiest" segment of the market.
- Kaiko Small-Cap Index: A non-tradable research index providing a purely quantitative view of the small-cap asset class.
These three indices represent different segments: broad altcoins, high-beta micro-caps, and a quantitative research perspective. Despite their structural differences, they all point to the same conclusion.
Benchmarking Against US Equities
The benchmark for the stock market is clear. US large-cap indices recorded gains of around 20% in both 2024 and 2025, with relatively shallow corrections. The largest intra-year decline for the S&P 500 was only in the mid-10% range, while the Nasdaq-100 maintained a steady upward trend. Returns were compounded year after year without significant losses.
In contrast, altcoin indices followed a completely different path. The CoinDesk 80 fell by 46.4% in the first quarter of 2025 alone, while the CoinDesk 20 – representing the large-cap group – "only" fell by 23.2%. By mid-July 2025, the CoinDesk 80 was still down about 38% year-to-date, while the CoinDesk 5 – tracking Bitcoin, Ethereum, and three other major assets – increased by about 12-13% during the same period.
Notably, the CoinDesk 5 and CoinDesk 80 have a correlation coefficient of 0.9. In other words, the two indices move in the same direction, but the P&L results are completely opposite: one side increases by low double digits, the other loses nearly 40%. The diversification benefit from holding small altcoins is almost non-existent, while the performance cost is substantial.
Small-Cap Underperformance
The small-cap segment performed even worse. By November 2025, the MarketVector Digital Assets 100 Small-Cap Index had fallen to a four-year low.
Over five years, this small-cap index recorded a return of approximately -8%, while the large-cap crypto index increased by about 380%. Institutional capital clearly prioritizes scale and liquidity while penalizing risk at the "tail end of the distribution." According to Kaiko data, the small-cap crypto group fell by more than 30% in 2024, while the mid-cap group also failed to keep pace with Bitcoin. Most of the gains were concentrated in a few large names such as Solana and XRP.
Although the proportion of altcoin trading volume relative to Bitcoin once returned to levels seen in 2021, 64% of altcoin liquidity is concentrated in the top 10 assets. Liquidity is not leaving crypto, but shifting to higher-quality assets.
Sharpe Ratio and Drawdowns
On a risk-adjusted basis, the gap widens further. The CoinDesk 80 and small-cap altcoin indices recorded deeply negative returns with volatility equal to or greater than that of stocks. The CoinDesk 80 lost 46.4% in just one quarter.
Small-cap indices consistently experienced peak-to-trough declines exceeding 50% at the index level. Meanwhile, the S&P 500 and Nasdaq-100 delivered two consecutive years of strong growth, with the worst drawdowns only in the mid-10% range.
| Index | 2025 Performance (Approximate) |
|---|---|
| S&P 500 | +17% |
| Nasdaq-100 | +17% |
| CoinDesk 80 | -40% |
| Small-Cap Altcoins | -30% |
Crypto altcoins are highly volatile and capital-destructive, while US stocks are volatile but controlled. Even if high volatility is accepted as a structural characteristic of altcoins, the reward per unit of risk in the 2024-2025 period is far less than US equities. Altcoin indices recorded negative Sharpe ratios, while the S&P 500 and Nasdaq-100 maintained clearly positive Sharpe ratios.
Implications for Bitcoin Investors and Liquidity Flows
The primary implication is the concentration of liquidity and the shift to quality. Since the start of 2024, small altcoins have consistently underperformed, while institutional capital has flowed into spot Bitcoin and Ethereum ETFs.
The "alt season" in the last cycle was more of a tactical trade than structural outperformance. The altseason index once soared to around 88 in late 2024 before collapsing to 16 in April 2025, completing a full round of gains and losses. By mid-2025, broad altcoin baskets had given back most of their gains, while the S&P 500 and Nasdaq continued to accumulate profits.
For capital allocators considering expanding their portfolios beyond Bitcoin and Ethereum, the data suggests a clear conclusion: broad altcoins do not outperform US equities in absolute returns and underperform Bitcoin.
FAQs
What is an "Alt Season" and why does the article say it's over?
"Alt Season" refers to a period when altcoins (cryptocurrencies other than Bitcoin) significantly outperform Bitcoin. The article suggests it's over because altcoins are performing poorly compared to traditional stock market investments, with negative returns and high volatility.
How have small-cap altcoins performed compared to the S&P 500 and Nasdaq-100 in 2024 and 2025?
While the S&P 500 and Nasdaq-100 saw gains of roughly 47% and 49% respectively, small-cap altcoin indices like the CoinDesk 80 and MarketVector Digital Assets 100 Small-Cap Index have experienced significant losses, with the latter hitting a 4-year low. This indicates a stark underperformance of altcoins compared to traditional stocks.
Should Bitcoin investors diversify into smaller-cap altcoins based on current market trends?
The article suggests that diversifying into smaller-cap altcoins might not provide risk-adjusted benefits, potentially adding a portfolio with a negative Sharpe ratio that remains highly correlated with stocks, indicating it might not be a wise investment strategy currently.
You've got the context, now make it count. Capitalize on your crypto knowledge and explore exciting pre-market opportunities on Whales Market, the earliest pre market trading platform.