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Altcoins at Disbelief Stage, says Trader: “Explosive Rally” Could Happen Soon

Last Updated May 13, 2024 1:40 PM
Teuta Franjkovic
Last Updated May 13, 2024 1:40 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • The Altcoin market is currently in the disbelief stage, which is historically followed by an explosive rally.
  • Moving averages indicate a buy signal for major altcoins.
  • Analysts think the fall in gas fees could trigger an altcoin rally.

Crypto traders are closely monitoring three technical indicators. This suggests that the altcoin market is currently in the “disbelief stage,” a phase historically followed by an “explosive rally.”

In a May 11 post, crypto analyst Mikybull Crypto informed  their 66,600 Twitter followers of this observation.

Altcoins Market Cap Poised for Explosive Rally

The disbelief stage signifies investor skepticism despite positive market signs. This time, a 24-point drop in the Crypto Fear and Greed Index over the past 30 days suggests the market is in a disbelief phase. Meanwhile, the current “Greed” score stands at 56.

Simultaneously, TradingView data  indicates a 17.55% decline in the total altcoin market cap, excluding the top 10 cryptocurrencies, over the same period, now valued at $264.9 billion.

total altcoin market cap
Credit: TradingView

Despite this decline, the market remains above the critical $250 billion support level. This, in turn, sees it positioned for a potential upward movement, according to pseudonymous crypto trader Rekt Capital  said on May 12.

Traders are monitoring three key indicators within the wider cryptocurrency market to guide their forecasts for the altcoin market’s trajectory. These indicators include the 20-day exponential moving average (EMA) , the stochastic relative strength index (RSI), and Bitcoin dominance. Each of these metrics plays a crucial role in shaping predictions about future market movements.

The Bitcoin dominance chart, which tracks Bitcoin’s market share compared to the total cryptocurrency market, remains one of the most enduring and frequently consulted indicators. It offers traders insights into the general investor mood and risk tolerance within the market.

As of this report, Bitcoin’s dominance stands at 54.7%, having declined by 0.56% in the last week. According to a May 11 post  on X by the pseudonymous technical analyst Yoddha, a further decrease could trigger an “altseason,” a period where alternative cryptocurrencies outperform Bitcoin.

Altcoin Summer Bottom Predicted Following Bitcoin Halving Selloff

Market analysts suggest that the cryptocurrency market, excluding Bitcoin, may reach its local bottom in June. This, in turn, means the next altcoin bull cycle.

Rekt Capital noted  that altcoins have historically sold off around the Bitcoin Halving and suggested a pattern where altcoins tend to bottom in early summer, following a sell-off in early February.

According to  Rekt Capital:

“Altcoins are following the plan perfectly. Altcoins bottomed in early February. Altcoins sold off around the BTC Halving. Altcoins to bottom early summer.”

The altcoin market experienced a significant downturn over the past month. Excluding the top ten largest cryptocurrencies, the market capitalization of altcoins dropped by over 21%, falling to $265 billion. Despite the recent monthly downturn, the altcoin market has shown resilience over a longer period. The market capitalization of altcoins is still up over 24% year-to-date (YTD)  and has surged by more than 167% over the past year.

Altcoin market cap
Credit: TradingView

On the monthly chart, 10 out of 12 moving averages (MAs) are indicating a buy signal for top altcoins, including Ether, which has seen some struggles recently. Moving average indicators, a staple in technical analysis, help to determine the average price of an asset over a specified period, providing insights into potential market trends and price stability.

Altcoin prices may see an upward trajectory linked to the M2 money supply, which has shown a year-over-year increase for the first time since November 2023. This change suggests that investors might begin seeking hedges against inflation or exploring alternative investments. The M2 money supply encompasses all cash and short-term bank deposits in the United States.

As the money supply in the world’s largest economy expands, a portion of this new capital could flow into altcoins and memecoins. Such an influx could potentially kickstart the onset of what is colloquially known in the cryptocurrency community as “altszn,” a period marked by significant gains in the values of alternative cryptocurrencies.

Cheap Gas Alert: Ethereum Fees Signal Potential Altcoin Rally

Gas fees on the Ethereum network have fallen to their lowest levels in six months, coinciding with a modest uptick in ETH’s price.

Analysts from the crypto analytics platform Santiment  interpret the drop in gas fees as a potential indicator of an impending altcoin rally.

Santiment reported that the average fee for an Ethereum transaction dipped to just $1.12.

The platform noted that transaction fees tend to mirror cycles of investor sentiment, alternating between periods of high optimism and significant pessimism.

Gas fees typically reach their peak during market highs and then decrease to lower levels during market lows.

Earlier in the year, Ethereum’s gas fees hit an eight-month peak in February, driven by heightened interest in the experimental ERC-404 token standard.

The current low gas fees on the Ethereum network might signal a potential uptick in activity, possibly setting the stage for an altcoin rally.

Lower Fees, Network Breather, and L2 Surge Signal Altcoin Chance

According to Santiment , the recent market retracement, along with decreased demand and less strain on the network, could lead to a faster than expected recovery for Ethereum and related altcoins.

According to CoinGecko, Ether has seen a 4.3% increase  over the past week, which aligns with observations of a minor rally in its price.

Furthermore, on April 27, three Ethereum layer-2 networks—Optimism (OP), Arbitrum (ARB), and Polygon, were ranked among the top five best-performing assets within the top 50 cryptocurrencies by market cap. These networks posted gains of 11.7%, 3.5%, and 2.8% respectively.

However, the downturn in network activity has resulted in an increase in the circulating supply of Ethereum.

In the past month, 74,458 new ETH were issued  while only 57,516 were burned, leading to a net supply increase in supply of 16,979 ETH. This development contrasts with the steady deflation observed over the previous five months.

It’s important to note that  Ethereum moved to a proof-of-stake consensus mechanism, known as ‘The Merge,’ on September 15, 2022. This was part of an effort to reduce the overall supply of Ethereum and potentially increase its value over time. Since then, more than 437,000 ETH has been burned.

Ethereum Transactions Skyrocket as DeFi Fuels Network Activity

The Ethereum network reported  a robust income of $365 million in the first quarter of 2024. This represented year-on-year revenue growth of 155%.

This figure represents a substantial 200% increase compared to the $123 million profit  recorded in the fourth quarter of 2023. A major factor contributing to this growth was the surge in decentralized finance (DeFi) activity during the three months.

Ethereum’s fee revenue, generated through user transactions, reached a notable milestone of $1.17 billion in the first quarter of 2024. This represented a 155% increase from the same period in 2023 and an 80% upswing from the previous quarter.

The increase in network activity, driven by the growth in DeFi applications, has propelled Ethereum’s average daily transactions in 2024 to surpass last year’s figures. The current average of 1.15 million daily transactions is nearing the peak levels observed during Ethereum’s significant run in 2021.

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