Altcoin season faces hurdles as capital spreads into AI and real-world assets

A broader range of investments, including AI products and tokenized real-world assets, is reducing the concentration of capital that supported past altcoin rallies, according to Shubh Varma, CEO of Hyblock Capital. He identified stronger spot demand as a key signal of improving crypto market conditions.

In an interview posted on CoinDesk’s X account on November 4, Varma said the market had not experienced a broad altcoin season over the past year and a half to two years. Investors now have more alternatives competing for a finite pool of capital, he said.

Varma described an altcoin season as a period when a substantial share of altcoins outperform Bitcoin. Among 100 tracked altcoins, 75% beating Bitcoin would meet that threshold, he said. During Bitcoin’s recent advance, however, the number reached only 41–43. He questioned whether the broad rallies seen in earlier cycles would return.

Previously, capital entering crypto repeatedly flowed into the same 10–30 large-cap coins, Varma said. Exchanges now offer alternatives such as tokenized real-world assets and perpetual futures linked to AI equities. He described capital as rotating between sectors, with AI currently attracting investment.

For signs of market recovery, Varma focuses on the balance between buying and selling flows in spot markets and perpetual futures. Perpetual demand tends to reflect shorter-term, leveraged activity, while spot demand captures longer-term investment, he said. The ratio he monitors is around 7–8 to 1 in favor of perpetuals; a decline toward 3 to 1 would indicate a healthier contribution from spot demand.

That improvement would not require spot activity to exceed perpetual activity. Spot demand could strengthen while perpetuals remained dominant, he explained. Varma characterized current conditions as neutral, with neither that improvement nor a pronounced bearish signal evident. He applies the same framework to Bitcoin, Ethereum and altcoins.

Varma also highlighted ETF inflows as a measure of institutional demand and open interest as an indicator of participation by both long and short traders. A gradual, steady increase in open interest, rather than abrupt changes, could reinforce evidence of stronger spot demand, he said.

Asked about the limited price impact of the Binance hack discussed in the interview, Varma pointed to the exchange’s ability to cover losses and the stability of resting buy and sell orders. He said Bitcoin fell from about $80,000 to $75,000 while order books showed little change. Reimbursing customers in crypto rather than dollars also created demand to repurchase those assets, helping contain the decline, he said.

The shift in investment choices is also changing demand for market data. Varma said Hyblock Capital users were looking beyond altcoins to oil-related products and tokenized real-world assets. The company was also seeing more use through AI agents and was adapting its platform to support trading through them.

Over the next year to a year and a half, Varma expects agents to take on more research and trading tasks, reducing the importance of investors logging directly into exchanges. He also said broader access through index funds, with individual crypto allocations of 1–3%, could bring trillions of dollars into the sector. His assessment was that access could expand even as the way investors participate changes.