Altcoin Season Coming? Decoding Market Trends and Predictions

Are current market conditions, including Ethereum spot ETFs and Bitcoin volatility, pointing to an imminent altcoin season? Read on.

In recent weeks, the cryptocurrency market has undergone critical changes, keeping everyone on edge. The turmoil began when the now-defunct Mt. Gox exchange started paying off their creditors, causing a sharp drop in Bitcoin (BTC) prices and triggering widespread panic, fueling speculation that the bull run may be over.

Adding to the uncertainty, the German government initiated a large-scale liquidation of its cryptocurrency holdings, causing BTC prices to fall further to around $53,700 on July 5.

Despite these setbacks, Bitcoin has since climbed back to the $58,000 mark as the market absorbs the shocks of the Mt. Gox payments and the German liquidation.

However, the real game-changer came unexpectedly with a dramatic incident involving former US President Donald Trump. Known for his pro-crypto stance, Trump was outlet in the right ear during a political rally.

Following the attack, speculation surrounding Trump’s possible political return and its positive implications for the cryptocurrency market acted as a catalyst.

As a result, Bitcoin’s price skyrocketed from $58,000 to over $63,000 on July 14, briefly reaching $65,000 on July 16 before settling at $64,937 at the time of writing.

BTC 1-week price chart | Source: TradingView

As if the market wasn’t volatile enough, another big event is on the horizon: Ethereum approval is in sight (ETH) ETFs.

The U.S. Securities and Exchange Commission (SEC) has granted preliminary approval to at least three of eight asset managers seeking to launch spot ETH ETFs. Final approval is contingent on the submission of their S-1 documents to regulators by the end of this week.

Approved asset managers, including heavyweights such as BlackRock, VanEck and Franklin Templeton, are expected to receive the green light from the SEC on July 22, with trading in these new products scheduled to begin the following day, July 23.

With these events sending ripples through the cryptocurrency market, the big question remains: what does this mean for altcoins? Are we on the verge of an altcoin season, or will BTC and ETH continue to dominate?

Let’s dig deeper into the data and market sentiment to find out if altcoin season is really upon us.

Altcoin dominance is taking a hit

The altcoin market has been going through a volatile phase lately, and understanding what’s going on requires analyzing some important data.

First, let’s talk about Bitcoin. domain. Since November 2022, BTC dominance has been strengthening. At that time, Bitcoin’s share of the total cryptocurrency market was around 40%. It then steadily rose and reached over 56% in April 2024. Since then, it has fluctuated between 54% and 56%, peaking at almost 55% on July 16.

BTC Long-Term Dominance Chart | Source: TradingView

On the other hand, the dominance of altcoins (excluding the top 10 coins by market cap) has followed a different pattern. It was high at around 19.3% in January 2022 but then dropped to 8.22% in June 2023. There was a recovery to 13.4% in March 2024, but after Bitcoin reached its all-time high, altcoin dominance dropped again to around 10.27% on July 16.

Altcoin long-term dominance chart | Source: TradingView

Ethereum has been the main driver behind any rise in altcoin dominance. When ETH prices rose, altcoin dominance followed, but other altcoins did not see the same level of interest or investment.

We can see this dynamic reflected in the Altcoin Season Index, which measures the performance of altcoins relative to Bitcoin. Typically, an Altcoin Season is considered active when more than 75% of the top 50 altcoins, excluding stablecoins, outperform BTC.

In October 2023, the crypto market turned bullish, and altcoins gained momentum. The index rose from 16 to a high of 84 in January 2024, suggesting that an altcoin season was beginning.

Altcoin Season Index | Source: Blockchaincenter.net

However, the momentum from BTC spot ETFs pushed altcoins aside, and the index fell to 16 in June 2024. Recently, as BTC lost steam, the altcoin market recovered, and the index rose to 46, marking the fastest increase since January.

But Mt. Gox refunds and German liquidation fears quickly sent the market tumbling again, and the index fell to 33 on July 16.

Ethereum played a major role in these movements. Data shows that whenever Ethereum prices rose, the Altcoin Season Index also rose, indicating that Ethereum is a key driver for the entire altcoin market.

For a true altcoin season to begin, this index needs to stay above 75 consistently for several weeks to months. Until that happens, Bitcoin will likely continue to dominate, with Ethereum playing a key support role.

Is altcoin season coming?

Much of the speculation about altcoins revolves around future events and historical patterns observed in the cryptocurrency market.

According to cryptocurrency analyst Wise Advice, the timing of altcoin season usually aligns with Bitcoin halving events. Historically, after each Bitcoin halving, which reduces the block reward for mining new bitcoins, the price of Bitcoin tends to reach new all-time highs (ATH) around 1 to 1.5 years later.

This rise in Bitcoin’s price is followed by a sharp rise in Ethereum and other altcoins. For example, during the third halving bull run in November 2021, Bitcoin hit its ATH, and shortly after, Ethereum peaked at $4,800.

Similar patterns have been observed in previous halving events, where altcoins like Solana (SUN), Polka dot (POINT) and Avalanche (AVAX) also hit their ATHs after Bitcoin’s rally.

The underlying mechanism behind this pattern is the flow of money into the market. Initially, investors flock to Bitcoin, driving up its price. As Bitcoin investors profit, they often reinvest in Ethereum and other altcoins. Due to the smaller market caps of these altcoins, even a relatively small influx of capital can cause substantial price increases.

This investment cycle from Bitcoin to Ethereum and then to smaller altcoins leads to a temporary dip in Bitcoin dominance, paving the way for altcoin rallies and eventually altcoin season.

Meanwhile, Glassnode co-founder Yann Allemann highlighted a recent market rotation in which riskier equity assets outperformed more stable ones, a sign that could indicate a similar shift in the cryptocurrency market.

Comparing it to a similar event in November 2020, it suggests that we could see a major rally in altcoins if this rotation continues. In 2020, such a shift led to a 400% increase in altcoin values ​​over the following four months.

While these predictions paint a promising picture, it is essential to approach them with caution. The market is inherently volatile, and while there are opportunities for gains, they come with risks that should not be ignored.

Always do your research, stay informed, and avoid making decisions based solely on hype.

Disclosure: This article does not constitute investment advice. The content and materials presented on this page are for educational purposes only.

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