Bitcoin’s recent price surge defied expectations, shooting up to $35,000 on October 24, following a period of sideways movement and dropping to around $25,000 in mid-August. This surge wasn’t limited to Bitcoin; several altcoins also made significant gains.
While Bitcoin rose by 32% from its October 19 low, some altcoins outperformed it. LINK surged by 62%, SOL climbed 45%, and MINA, among the top 100, skyrocketed by 147% during the same period.
Interestingly, this surge appeared to favor altcoins with smaller market caps, with Ethereum and Binance Coin trailing behind both Bitcoin and the aforementioned altcoins.
With these developments, the question arises: Is this the beginning of the altcoin season? And if so, what should we be on the lookout for?
Altcoin season refers to a market phase where altcoins outperform Bitcoin. During this period, market enthusiasm peaks, and investors become more willing to embrace greater risk by diversifying into smaller-cap altcoins.
Historically, altcoin seasons follow a predictable path characterized by distinct phases. These phases illustrate how capital moves within the market and how sentiment evolves in the lead-up to the altcoin season. Let’s dissect each phase.
Phase 1: Bitcoin
In essence, these stages represent a conceptual evolution of capital flow within the cryptocurrency market, transitioning from a phase dominated by Bitcoin to a more expansive altcoin surge.
They imply that as Bitcoin and Ethereum reach saturation, funds begin diversifying into other promising cryptocurrencies, ultimately leading to a full-fledged altcoin season where many coins see substantial price increases.
As numerous altcoins have experienced more than a 90% drop from their all-time highs and are currently showing signs of upward movement, it prompts the question: Is this the ideal moment for accumulation? However, despite the notable gains in certain altcoins, the prevailing evidence suggests that we may not have entered a full-fledged altcoin season.
The heart of an altcoin season lies in the consistent outperformance of the altcoin market in comparison to Bitcoin. At present, this particular scenario is not yet evident.
When comparing the Bitcoin Market Cap to the Total Market Cap Excluding Bitcoin (including Ethereum), a clear divergence in trends emerges. Starting from March, Bitcoin established a pattern of higher highs, forming an ascending structure (illustrated by white lines), while TOTAL2 exhibited a descending range (indicated by red lines).
Bitcoin’s dominance has been steadily increasing since September of the previous year when it dropped to 38.85%. Breaking free from the descending trendline, it has maintained an upward trajectory throughout the year, even surpassing the 50% mark. Currently, it stands at 53.8%.
The last time Bitcoin’s dominance reached these levels was on March 19. When we compare Bitcoin’s dominance to TOTAL2, we observe that it tends to rise at the expense of altcoins. Therefore, a key indicator to watch for the emergence of an altcoin season would be a decline in Bitcoin’s dominance.
Upon reviewing the chart above, it appears that this uptrend is likely to persist, although questions remain about how much further it can go. A near-term downturn may indicate a favorable environment for altcoin investments.
The chart clearly illustrates the dynamics of an altcoin season, aligning with the phases discussed earlier. Bitcoin initially reached its peak on February 22, surging to just over $57,000. Following this, it entered a period of sideways movement that extended until May 12, marking an altcoin season lasting approximately 80 days.
During this period, while Bitcoin maintained relative stability, Ethereum experienced significant growth. On February 22, Ethereum was valued at $1850, but by May 12, it had climbed to $4130. Concurrently, the TOTAL2 index surged, leaping from $630 billion to $1.35 trillion.
This sequence highlights the typical stages of an altcoin season: Bitcoin surges, stabilizes, opening the door for Ethereum’s ascent, and subsequently, the smaller altcoins begin to rise.
The disparity between Bitcoin’s price and Ethereum’s price is another important chart to monitor, which can be easily tracked through the ETHBTC chart.
At present, ETH is in a downtrend against BTC, but it’s approaching a key horizontal level at 0.053, which has previously acted as a support. Additionally, the daily chart’s Relative Strength Index (RSI) is at the 30% mark, indicating oversold conditions, making a rebound more probable.
Should a rebound occur and ETH begin to surpass the descending resistance, it could serve as an indicator for the initiation of an altcoin season. This development is what to watch for next.
Despite witnessing a transition in market sentiment from bearish to notably bullish, marked by double-digit gains across the market, we cannot definitively declare the onset of an altcoin season.
Notably, Ethereum, Binance Coin, and other major altcoins appear to have been overlooked. Nonetheless, given the limited potential for further upside in Bitcoin’s dominance and Ethereum’s readiness for an upswing, the situation may change in the near future.
In the upcoming period, the possibility of an altcoin season is on the horizon, but it hinges on Bitcoin completing its ascent and capital flowing into Ethereum and beyond.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.