Altcoins
Signs of an Altcoin Season – Why Are We Not There Yet?
- Altcoins have performed well over a six-month period, but this does not signal an altcoin season.
- Bitcoin’s dominance chart could see accelerated gains for the altcoin’s market cap.
Bitcoin [BTC] couldn’t shake his halved blues, even though almost a month had passed since the event. Market participants are looking forward to a bull run, both for BTC and altcoins.
The altcoin season began in September 2023 and has seen a pullback over the past six weeks.
There is a lot more in store for altcoins, but they have already seen a decent return during this six-month window. How crazy could altcoin season get once Bitcoin is on track to hit the top of this cycle?
Reproduce the performance of the past cycle
Source: TOTAL3 on TradingView
During the 2020 cycle, the altcoin market capitalization increased from $51.2 billion in May 2020 to $1.13 trillion in November 2021.
This is a gain of 21.6x, and a similar result during this cycle could push the market cap to $6 trillion.
That seems like a mind-boggling number compared to $640 billion at press time, but crypto cycles have a way of beating expectations.
Even though altcoins have performed well in recent months, they are competing with Bitcoin for a share of capital inflows.
This could change once investors are willing to accept more risk, confident in expanded crypto gains, and look to expand their altcoin holdings.
Bitcoin Dominance May Hold the Key
Source: BTC.D on TradingView
Altcoin winds could become considerably more bullish once Bitcoin’s dominance begins to wane. This chart shows the percentage of the total crypto market cap that Bitcoin has captured.
Once a serious downtrend begins, it would indicate that participants were more eager to purchase altcoins than Bitcoin.
Over the past 13 months, Bitcoin’s dominance has slowly increased. This is typical of bear markets and persists well into the bull run.
The few months where this metric is in free fall are when the altcoin season truly begins.
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Comparing the altcoin market cap chart with the BTC.D chart, we can see that the largest gains in altcoins were made once Bitcoin dominance was in a downtrend.
Therefore, market participants expecting an altcoin season this cycle might be wary of a decline in Bitcoin dominance.