Small-Cap Crypto Tokens Hit Four-Year Low: Is 'Alt Season' Dead?

Source: CryptoNewsNet Original Title: Small-cap crypto tokens just hit a humiliating four-year low, proving the “Alt Season” thesis is officially dead Original Link:

Performance Divergence: Crypto vs. Equities

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%.

In stark contrast, 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.

Analyzing Three Altcoin Indices

For the analysis, three altcoin indices were tracked:

1. CoinDesk 80 Index - Launched in January 2025, tracking the next 80 assets after the CoinDesk 20, providing a diversified basket beyond Bitcoin, Ethereum, and the largest names.

2. MarketVector Digital Assets 100 Small-Cap Index - Captures the 50 smallest tokens in a 100-asset basket and serves as the “junk end of the market” barometer.

3. Kaiko’s Small-Cap Index - A research product rather than a tradable benchmark, offering a quantitative research perspective on the smaller-asset cohort.

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

The Numbers Tell a Clear Story

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. The CoinDesk 80 returned -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.

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. The MarketVector Digital Assets 100 Small-Cap Index fell to its lowest level since November 2020 by November 2025. 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.

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. While altcoin trading volume dominance versus Bitcoin climbed back to 2021-era highs, 64% of alt volume concentrated in the top 10 altcoins. Liquidity did not vanish from crypto, but moved up the quality curve.

Risk-Adjusted Returns: A Widening Gap

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.

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.

Broad alt indices posted negative Sharpe ratios over the 2024 and 2025 window, while S&P and Nasdaq delivered strongly positive Sharpe ratios. 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.