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Is Altcoin Season Coming? ETH Price Might Serve As An Indicator

Last Updated June 26, 2024 2:07 PM
Nikola Lazic
Last Updated June 26, 2024 2:07 PM

Key Takeaways

  • The altcoin market cap has dropped 18% since June.
  • Analysts predicted a possible 100% altcoin rally soon.
  • ETH is rebounding, which could trigger a new altcoin season.

Altcoin Market Outlook

Since the start of June, the total cryptocurrency market cap, excluding Bitcoin, has fallen by over 18%, from a high of $1,185T to a low of $960B.  This trend suggests a capital shift away from altcoins, potentially causing them to lose value, but it is still part of the general market sentiment. 

Altcoin capitalization
TOTAL2 | Credit: Nikola Lazic/Tradingview

However, this could be its wave 4 from a larger five-wave cycle, meaning another push to the all-time high area could happen. 

Well-known crypto analyst Michael van de Poppe predicts this could be the last correction before new capital flows into the altcoin market. According to van de Poppe, the current pessimistic sentiment towards altcoins, reflected in their declining Bitcoin valuations, may indicate a potential resurgence similar to past trends.

Van de Poppe highlights the impressive past surges of altcoins like Solana ($SOL), Fetch.ai ($FET), and Render Token ($RNDR), which saw gains of over 500%, 650%, and 300%, respectively. These historical patterns support his forecast for a potential altcoin recovery.

Van de Poppe notes that the altcoin market cap is currently 50% below its all-time high from 2021, with the recent correction adding an additional 30% decline. He anticipates that as the correction ends, altcoins could see a potential 100% rally, following Bitcoin’s trajectory.

Understanding Altcoin Season

Altcoin season refers to the market period when altcoins outperform Bitcoin. During this time, the market experiences heightened enthusiasm, and investors feel confident taking greater risks by investing in smaller-cap altcoins.

Altcoin Season
Path To Altcoin Season

Historically, altcoin season follows a predictable pattern, consisting of several phases that outline how money flows through the market and how sentiment evolves, leading to “Altseason.” Let’s break down each phase:

Phase 1: Bitcoin

  • Money Flow: Capital primarily flows into Bitcoin.
  • Market Behavior: There’s a significant increase in Bitcoin’s price due to the inflow of money.
  • Phase Overlap: While Bitcoin is surging, some capital begins to flow into Ethereum, though Ethereum’s performance may still fluctuate relative to Bitcoin.

Phase 2: Ethereum

  • Money Flow: Capital starts favoring Ethereum more prominently.
  • Market Behavior: Ethereum begins consistently outperforming Bitcoin. During this phase, there’s often talk of Ethereum potentially surpassing Bitcoin in market cap, a phenomenon known as “the flippening.”
  • Phase Overlap: As Ethereum gains traction, large-cap altcoins start receiving more investment, leading to significant price increases.

Phase 3: Large Caps

  • Money Flow: Large-cap altcoins (excluding Bitcoin and Ethereum) see increased capital inflow.
  • Market Behavior: Ethereum maintains its strong performance, and large-cap altcoins start experiencing rapid price increases (“going parabolic”).
  • Phase Overlap: Altcoins with solid fundamentals, regardless of market cap, begin to see price pumps.

Phase 4: Altseason

  • Money Flow: Capital flows into a wide range of altcoins, irrespective of their market cap.
  • Market Behavior: Large-cap coins experience sharp price increases followed by significant declines (“blow off tops”). Middle and smaller market cap coins also surge. This phase is characterized by widespread excitement and bullish sentiment, with an abundance of memes and a general sense of “mania.”

These phases describe the theoretical progression of money movement in the cryptocurrency market, transitioning from a Bitcoin-centric phase to a broader altcoin rally. They suggest that as Bitcoin and Ethereum saturate, investors look for other promising coins, culminating in a full-blown Altseason where most coins see significant gains.

Is Bitcoin Season Ending Soon? 

Bitcoin’s dominance steadily grew from a low of 39% in November last year. On April 15, right after the major downfall across all cryptocurrencies ended, this value spiked to 57%, the highest since April 2021. 

BTC.D
Bitcoin Dominance | Credit: Nikola Lazic/Tradingview

 

However, the rise has slowly lost momentum since January, forming an ascending triangle that can be interpreted as a rising wedge. These patterns usually indicate the ending phase of an uptrend, and as we can count a five-wave advancement, it looks like the end is near for Bitcoin’s dominance. 

Altcoin Index
Altcoin Index | Source: blockchaincenter

Looking at the altcoin index, we can see that we are in a Bitcoin season, but this value fell to 16 on June 20, 2024, which is close to its bottom point. 

In comparison, the last altcoin season started on 16 October 2023 and peaked in January at 75. As we’ve seen this index returning to its lower range values, it indicates that we might be on the cusp of another altcoin season. 

Ethereum’s Rise Would Indicate The Start? 

Since the bull market’s start, Ethereum (ETH) has yet to catch up, showing slower price action without a clear catalyst. However, recent developments suggest a potential shift. ETH has outperformed Bitcoin (BTC) by about 9% points from its 3-month lows, partly due to a change in the SEC’s stance on the ETH spot ETF, indicating that ETH could have more surprises in store.

ETHBTC
ETHBTC | Credit: Nikola Lazic/Tradingview

The ETH/BTC chart shows a rebound from a multi-year low of 0.045 BTC after a long-term downtrend that began in September 2022. If ETH/BTC breaks out of this downtrend with strength, ETH could attract significant market attention. 

Upcoming Catalysts

Several potential catalysts could reinforce ETH’s bullish price action, including:

  • Market Sentiment: ETH’s performance is closely tied to global market sentiment. It is expected to do well if the overall crypto market remains in a bull phase.
  • Nasdaq Concentration: The heavy influence of companies like NVIDIA on Nasdaq gains could impact ETH if these stocks correct.
  • ETF Expectations: Negative surprises regarding the ETH spot ETF, such as lower-than-expected net inflows, could affect ETH in the short term.
  • TradFi Understanding: Traditional finance (TradFi) investors find it harder to understand ETH compared to BTC, as ETH’s value proposition is more complex and diverse.

Conclusion 

Following the logic from the path to the altcoin season, we’ve already seen the first stage of this cycle. The market was mostly bullish until mid-March, favoring Bitcoin, which, unlike Ethereum, achieved a new all-time high. 

We’ve seen some altcoins pumping that were mostly capped to sector-related hype, such as memecoin and AI. Ethereum has yet to establish its dominance among altcoins, and once it does, there is a strong chance that many altcoins will piggyback off of it. 

This is why a breakout on the ETHBTC chart above its descending channel and below the ascending triangle on the Bitcoin Dominance chart could be the first two major indicators of the coming altcoin season and something to watch out for. 

Disclaimer
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.
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