Altcoin Season Coming? Decoding Market Trends and Predictions

Do current market conditions, including spot Ethereum ETFs and Bitcoin volatility, indicate an impending altcoin season? Read on.

In recent weeks, the cryptocurrency market has undergone critical changes, putting everyone on the defensive. The turmoil began when the defunct Mt. Gox exchange begin repay its creditors, causing a sharp fall in Bitcoin (Bitcoin) sent prices soaring and triggered widespread panic, fueling speculation that the bull run may be over.

Adding to the uncertainty, the German government launched a large-scale sale of its cryptocurrency holdings, pushing BTC prices even lower to around $53,700 on July 5.

Despite these setbacks, Bitcoin has climbed back to the $58,000 mark as the market absorbed the shocks from both the Mt. Gox repayments and the German bitcoin selloff.

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

Following the attack, speculation around Trump’s potential political comeback and its positive implications for the cryptocurrency market acted as a catalyst.

As a result, the price of Bitcoin rose 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 Price Chart 1 Week | Source: TradingView

As if the market wasn’t volatile enough, another major development is on the horizon: the approval of Ethereum spot (ETH) AND F.

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 their S-1 filings being submitted to regulators by the end of this week.

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

These events have caused a stir in the cryptocurrency market, but the big question remains: what does this mean for altcoins? Are we on the cusp of an altcoin season, or will BTC and ETH continue to dominate?

Let’s take a closer look at the data and market sentiment to find out if an altcoin season is just around the corner.

Altcoin Dominance Under Attack

The altcoin market has been experiencing a volatile period of late, and understanding what’s going on requires looking at some important data.

First, let’s talk about Bitcoin dominanceSince November 2022, BTC’s dominance has strengthened. At that time, Bitcoin’s share of the total cryptocurrency market was around 40%. It then climbed steadily and reached over 56% in April 2024. Since then, it has fluctuated between 54% and 56%, standing at nearly 55% as of July 16.

Bitcoin Long-Term Dominance Chart | Source: TradingView

On the other hand, the dominance of altcoins (excluding the top 10 coins by market capitalization) has follow up 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 fell back to around 10.27% on July 16.

Altcoin Long-Term Dominance Chart | Source: TradingView

Ethereum has been the primary driver of any increase 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 Altcoin performance versus 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 cryptocurrency market turned bullish and altcoins gained strength. 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 of spot BTC ETFs pushed altcoins aside, and the index fell back to 16 in June 2024. Recently, as BTC lost some of its steam, the altcoin market recovered and the index rose to 46, marking the fastest rise since January.

But the Mt. Gox repayments and fears of massive selling in Germany quickly sent the market into decline, and the index fell to 33 on July 16.

Ethereum has played a major role in these movements. Data shows that every time Ethereum prices have increased, the Altcoin Season Index has also increased, indicating that Ethereum is a key driver for the entire altcoin market.

For a true altcoin season to begin, this index must remain consistently above 75 for several weeks, if not months. In the meantime, Bitcoin will likely continue to dominate, with Ethereum playing a key supporting role.

Is Altcoin Season Right Around the Corner?

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

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

This rise in Bitcoin price is followed by a sharp rise in Ethereum and other altcoins. For example, during the third halving cycle in November 2021, Bitcoin reached its ATH, and shortly after, Ethereum reached its peak at $4,800.

Similar patterns have been seen during previous halving events, where altcoins like Solana (GROUND), Peas (POINT), and Avalanche (AVAX) also saw their ATHs following Bitcoin’s rally.

The mechanism behind this model is the flow of money into the market. Initially, investors flock to Bitcoin, which drives up its price. When Bitcoin investors make profits, they often reinvest in Ethereum and other altcoins. Due to the small market capitalization of these altcoins, even a relatively small influx of capital can lead to substantial price increases.

This cycle of investment from Bitcoin to Ethereum and then to smaller altcoins leads to a temporary decline in Bitcoin dominance, giving way to altcoin rallies and eventually altcoin season.

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

Comparing this to a similar event in November 2020, he suggests that we could see a massive surge in altcoins if this rotation continues. In 2020, such a shift led to a 400% increase in the value of altcoins over the next four months.

While these forecasts are promising, they should be approached with caution. The market is volatile by nature and, while opportunities for profit exist, they carry risks that should not be overlooked.

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 provided for educational purposes only.

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