Altcoin Market Cap May Face More Downside Pressure in October

The altcoin market has faced a challenging start to the month. Altcoin market capitalization has dropped about 25% in October, and the decline could continue. Although some see this as a normal correction, on-chain metrics and liquidity trends indicate that further pressure may be ahead.

Exchange Inflows Point to Growing Selling Pressure

Altcoins are showing weakness not only in sentiment but also in on-chain metrics. CryptoQuant reports that the 7-day average of altcoin inflow transactions recently topped 70,000, the highest figure of 2025.

In past cycles, similar spikes often led to more market volatility. Large transfers to exchanges usually indicate rising sell pressure or portfolio changes. Coin Bureau noted on X that “transactions sending alts to exchanges just hit a new YTD high, signaling more sell pressure or traders preparing for the next rotation”.

Still, analysts are divided in their interpretation. Some consider it a sign of panic selling, while others see it as a normal rotation from weaker to stronger assets. Previous data support both views. For example, a similar inflow spike earlier this year came just before a 20% correction, though prices later recovered as capital moved into mid-cap coins.

How Does Stablecoin Activity Affect the Market?

Tether (USDT) and other stablecoins help measure market liquidity. Lower inflows of stablecoins into exchanges indicate weaker potential buying power. According to CryptoQuant’s Stablecoin CEX Flow metric, netflow remains slightly positive but has declined significantly since mid-September, approaching zero.

This indicates traders are holding back. With limited fresh funds entering exchanges, markets are less able to absorb selling pressure, which often accelerates losses in altcoins during sell-offs.

The USDT.D index, which measures Tether’s share of total market capitalization, recently rose above 5%. Analytics account Altcoin Vector says this shows a risk-off mood: “The recent deleverage pushed USDT dominance higher, and historically, similar moves have matched sharp drops in Alts”.

A similar situation happened in late 2024, before smaller-cap assets lost over 30 percent. If the pattern repeats, October could continue to test investors, especially with liquidity tight and macro uncertainty high.

Potential Recovery and Risks

Despite multiple negative signals, some analysts believe the market may be approaching a structural bottom. Technical trader Merlijn, who monitors long-term momentum patterns, noted that the MACD crossover in the altcoin market has occurred for the first time in almost two years. In the past eight years, this signal has appeared only three times, each marking the early stages of significant recoveries.

The current market, however, does not have the same liquidity as before. Regulatory pressures and lower stablecoin inflows may slow any recovery.

Still, some traders assume the bottom may come gradually rather than sharply. They predict a period of consolidation that could last until the end of the year. This is not necessarily bad, as it can remove short-term speculation and create better conditions for long-term growth.

What Does It Mean for Traders?

Currently, the evidence points to further downside risk for altcoins, particularly if market sentiment deteriorates or Bitcoin experiences another drop. The mix of increasing selling pressure and declining buying support is rarely favorable.

Nevertheless, if the MACD signal holds, it could signal the start of a rebound or a temporary recovery. But for it to be reliable, it would require confirmation through higher volume, new capital inflows, and steady on-chain metrics.