A decade ago, the cryptocurrency market was simple: when bitcoin increased, some 500 or more alternative cryptocurrencies followed suit; when it crashed, the entire market crashed. Wallets spread across “diverse tokens” with unique use cases seemed diversified on paper, but collapsed during the bitcoin crashes.
Fast forward to 2026 and very little has changed, even though the number of altcoins has increased to several thousand.
Although institutions supposedly describe cryptocurrencies as a multifaceted asset class similar to stocks, with each project boasting distinct investment appeal, the reality is bleak. The market remains a one-trick pony, following BTC up and down, offering no real diversification.
The price evolution so far this year underlines that fact. The price of Bitcoin has plunged 14% to $75,000, the lowest level since April last year, and almost all major and minor tokens have lost a similar amount, if not more.
CoinDesk has 16 indices that track the performance of various coins with unique use cases and appeal, and almost all of them are down between 15% and 19% this year. Indices linked to DeFi, smart contracts and computing currencies are down 20% to 25%.
This is where it becomes more alarming: tokens tied to blockchain protocols that generate real income have fallen along with BTC.
According to DefiLlama, decentralized exchanges and lending and borrowing protocols such as Hyperliquid, Pump, Aave, Jupiter, Aerodrome, Ligther, Base and layer 1 blockchains such as Tron are among the top revenue generators in the last 30 days. This is in stark contrast to bitcoin, which has lately failed to fulfill its dual use as digital gold and payments infrastructure.
The native tokens of most of these protocols are in the red. For example, the AAVE token of the leading Ethereum-based lending and borrowing protocol, Aave, has fallen 26%. Hyperliquid’s HYPE stands alone, up 20% even after retreating from $34.80 to $30, fueled by the rise of tokenized gold and silver trading.
The disappointing trend is the result of a popular narrative that labels large-cap tokens like bitcoin, ether and solana as safe havens (safe pockets during downturns) while labeling income-generating projects as volatile, according to some observers.
“The jokers who run this industry will continue to tell you that BTC, ETH, and SOL are the “big safe havens”; meanwhile, the only things that make money in downturns are $HYPE, $PUMP, $AAVE, $AERO, and a few other DeFi protocols,” Jeff Dorman, chief investment officer at Arca, said on X.
He added that the crypto industry needs to borrow a page from traditional markets by building consensus around truly resilient sectors, such as DeFi platforms, and reinforcing their haven appeal through exchanges, analysts and funds.
Just as Wall Street brokers and research firms viewed “consumer staples” or “investment grade bonds” as recession darlings, turning data into price outperformance during bear markets, cryptocurrencies must anoint and promote their safe havens to make them a reality.
“Why do you think certain corporate bonds and stocks do better than others in crises? Because the industry decided certain sectors were ‘defensive’: consumer staples, utilities, healthcare, etc.,” Dorman explained.
Cash equivalents play spoilsport
According to Markus Thielen, founder of 10x Research, part of the problem is stablecoins, digital tokens whose values are pegged to an external reference, such as the US dollar. They are often considered cash equivalents. And so, when the largest cryptocurrency falls, traders de-risk their portfolios by switching to stablecoins.
“Unlike stock markets, where capital is typically required to remain invested, the rise of stablecoins has fundamentally changed positioning in cryptocurrencies. Stablecoins allow investors to quickly move from bullish exposure to neutral exposure, effectively serving as a defensive allocation within the cryptocurrency market,” Thielen told CoinDesk.
He added that bitcoin has always been the most dominant cryptocurrency and consistently accounts for more than 50% of the total digital asset market value. This makes it more difficult to diversify.
“[Still] Among the major tokens, BNB and TRX have historically behaved most defensively, with TRX showing the strongest defensive characteristics,” he noted. TRX is down just 1% this year, outpacing BTC’s steeper decline.
Looking forward
Institutional participation in the bitcoin market skyrocketed after the debut of spot ETFs in the United States two years ago. This is evident by BTC’s share of the total crypto market, which has remained above 50% since then.
This trend is unlikely to change, meaning the prospects for a broader decoupling of the crypto market from bitcoin appear bleak.
“Will continue to focus on BTC as the current recession helps kill off zombie projects and unprofitable businesses,” Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.
