Bitcoin's sudden plunge reveals the truth: the crypto market is still dominated by BTC, and so-called diversification is just an illusion?

On February 2nd, news reports that Bitcoin recently dropped to approximately $75,000, a 14% decline year-to-date, hitting a low not seen since April of last year. This round of correction once again exposes a harsh reality: even by 2026, the entire cryptocurrency market remains highly dependent on Bitcoin’s movements, and the so-called “diversified investment” strategy almost fails under extreme market conditions.

Although thousands of tokens are now available in the market, they still tend to rise and fall together with Bitcoin during downturns. Multiple indices show that since the beginning of the year, most crypto asset-related indices have declined by 15% to 19%, with sectors related to DeFi, smart contracts, and computational networks experiencing even larger drops of 20% to 25%. Even blockchain protocols with real revenue sources have not escaped the strong correlation with BTC token prices.

Data indicates that over the past 30 days, some decentralized protocols and Layer 1 networks still generated considerable revenue, but their tokens generally underperformed. AAVE has fallen over 20% this year, with only a few projects like HYPE maintaining relative resilience driven by specific applications. Jeff Dorman, Chief Investment Officer at Arca, pointed out that the market still regards BTC, ETH, and SOL as “mainstream safe-haven assets,” while protocols capable of generating cash flow are being overlooked.

Markus Thielen, founder of 10x Research, believes that the widespread adoption of stablecoins has intensified this phenomenon. As “cash equivalents,” they enable investors to quickly withdraw in times of risk, thereby amplifying Bitcoin’s dominant effect. Meanwhile, Bitcoin’s long-term market share exceeding 50% of the total crypto market cap also makes true asset diversification more difficult.

Looking ahead, as institutional funds continue to concentrate in Bitcoin, its core position within the crypto ecosystem may persist for the long term. Jimmy Yang, co-founder of Orbit Markets, stated that capital will continue to flow toward BTC, and industry consolidation will accelerate. Topics such as “Bitcoin dominance,” “correlation in the crypto market,” and “impact of BTC decline” are fueling ongoing reassessment of risk structures among investors.