Altcoin Season Is Approaching — Hashkey Capital Gives Insights
Insights About Altseason | Credit: Derek Fenech
Key Takeaways
- The Bitcoin Dominance Rate (BTCD) created a bearish engulfing candlestick.
- The Altcoin Market Cap (ALTCAP) broke out from a descending parallel channel.
- Hashkey Capital published a report suggesting that the Altcoin season has started.
During the two previous altseasons, Bitcoin’s Dominance fell roughly 30% in a period between 2-4 months. In the 2017-2018 altseason the catalyst was the Initial Coin Offering (ICO) boom, while in 2020-2021 it was the Decentralized Finance (DeFi) and Non-Fungible Token (NFT) boom.
The Bitcoin Dominance rate declined after reaching a 1,300-day high in November but has regained its footing this week. So far, the altcoin market has been heavily tilted toward memecoins.
Let’s analyze some charts and see if this cycle’s altcoin season has finally started.
Hashkey Capital’s Report
On Oct. 22, Hashkey Capital published a report called “Why We Are Bullish on Altcoins”, stating that the likelihood of an altcoin season beginning soon is high.
In exclusive comments for CCN, Hashkey Capital’s Partner, Liquid Fund and Research director Jupiter Zheng said that the RWA and DePIN sectors are interesting since they connect the traditional and emerging financial structures.
Zheng says that the RWA and DePIN are bridging this gap differently:
RWAs have significant institutional investment, as evidenced by Mantra’s $500 million real estate tokenization and BlackRock’s BUIDL fund.
As for DePIN, we have entered a more mature phase where projects need to prove their real-world utility. There is an interesting intersection with AI, specifically in decentralized computing and storage.
When comparing previous altseasons, Zheng believes the current market shares similarities with 2020-2021, like the high Bitcoin dominance and renewed interest in sectors with a strong real-world utility like RWAs.
In 2017-2018, it was mainly the ICO boom driving demand, while 2020-2021 had new ecosystems and applications because of the rise of DeFi and NFTs. In the current altcoin season, institutional capital enters through regulated vehicles like ETFs. This should contribute to a more sustainable expansion phase.
Zheng believes the current market dynamics are unique because of the ETF effect. He stated:
Unlike previous cycles where crypto-native funds drove rallies and could easily rotate capital into altcoins, ETF-driven growth tends to stay concentrated in Bitcoin and Ethereum due to regulatory constraints. We’ll need to see this institutional capital fully deployed before expecting significant rotation into the broader altcoin market.
As for Ethereum, Zheng suggests that record ETF inflows and narrowing spreads between the federal funds rate and Ethereum staking yields position ETH for potential outperformance, supported by rate cuts and growing network usage. However, sustained upward momentum depends on Ethereum returning to a deflationary state as network activity rebounds.
It is worth mentioning that the ETH supply has become deflationary since Nov. 11, though is still inflationary since the Dencun upgrade in March.
Zheng concluded by saying that Bitcoin’s rise amid declining gold prices reflects a shift toward risk-on assets. The BTC/Gold ratio suggests we’re in the early stages of a broader crypto market rally. Historical trends indicate Bitcoin’s growth could eventually spark interest in altcoins, especially as easing monetary policies drive capital into high-growth sectors like DeFi and AI.
BTCD’s Bearish Candlestick
The weekly time frame BTCD chart shows that the price has increased in a five-wave upward movement since September 2022. The increase led to a high of 60.57% in the first week of November. This was an over 1,300-day high and took BTCD to the 0.618 Fibonacci retracement resistance level of 60.43%.
Despite the prolonged upward movement, there are several signs of a local top forming.
Besides reaching resistance, BTCD also did a failed breakout above an ascending wedge pattern (black circle) by creating a bearish engulfing weekly candlestick. Nevertheless, this week’s bullish candlestick negates it if it holds.
The ascending wedge is considered a bearish pattern, leading to breakdowns most of the time.
As per the wave count, the wedge is likely wave five in the increase (white), which developed into an ending diagonal, hence the wedge shape. The sub-wave count is in black.
Finally, the weekly Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD) have generated bearish divergences (green), predicting a bearish trend reversal.
So, the Bitcoin Dominance Rate may begin a correction soon, marking the beginning of alt season.
ALTCAP Breaks Out
The Altcoin market cap gives an extremely bullish reading, mirroring the bearishness of the BTCD. This is because the ALTCAP broke out from a long-term descending parallel channel.
ALTCAP broke out decisively by creating a bullish engulfing candlestick last week. Before last week’s breakout, ALTCAP had made four unsuccessful breakout attempts (black icons).
If the increase continues, the next target will be at $1.61 trillion. The 1.61 external Fibonacci retracement resistance creates this target.
Technical indicators also support this upward movement, since both are moving upward and are above their bullish thresholds.
Since this is not even a new all-time high, the increase may accelerate further, though the $1.61 trillion target serves as a first area for a potential local top.
Altcoin Season Has Started
The bearish readings from the BTCD and the bullish ones from the Altcoin market cap suggest that altcoin season has finally started. If this is the case, altcoins could increase considerably in the next few months, outperforming Bitcoin by a large margin.
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