Altcoins
The Altcoin party is on hold? Index hints at stagnant market
The cryptocurrency market has seen notable price movements since the start of the year, with Bitcoin (BTC) is leading the charge. Despite Bitcoin’s impressive run, the long-awaited altcoin season has yet to materialize.
Altcoin enthusiasts are wondering if the current trends in Ethereum (ETH) and other altcoins are enough to trigger this market shift.
Bitcoin Market Domination
Bitcoin continues to occupy a dominant presence in the cryptocurrency market. According to CoinMarketCapBitcoin dominance remains above 50%, meaning more than half of the market capitalization is tied to BTC.
This high level of dominance is a significant factor preventing the start of an altcoin season, as it limits the market share available to other cryptocurrencies.
The Altcoin Season Index: A Measure of Market Changes
A key metric to gauge the start of the altcoin season is the Altcoin Season Index from blockchaincenter.net. Currently, this index stands at 35. For an official altcoin season to be declared, the index must reach 75.
This threshold is reached when 75% of the top 50 altcoins outperform Bitcoin. Although some individual altcoins are showing strong performance, broader market trends indicate that we are not yet in an altcoin season.
Ethereum, the second largest cryptocurrency by market capitalization, has shown significant upward movements. Currently trading at around $3,889, Ethereum has maintained a strong uptrend as indicated by its Relative Strength Index (RSI).
Historically, Ethereum rallies have often marked the start of the altcoin season. However, broader market metrics need to align for this trend to hold.
While Bitcoin and Ethereum are grabbing headlines, other altcoins are making waves with remarkable gains. Pepe (PEPE) has surged more than 1,000% in the past three months, significantly outperforming Bitcoin.
Similarly, Dogwifhat (WIF) increased by almost 900% during the same period, demonstrating strong bullish trends. These lesser-known altcoins are attracting significant investor interest, contributing to localized changes in market capitalization.
Total crypto market cap at $2.5 trillion on the daily chart: TradingView.com
Market capitalization and investor behavior
The total market capitalization of cryptocurrencies is approximately $2.55 trillion. In this context, altcoins hold less than 50%, with Ethereum alone representing 18%.
Investors often seek higher short-term gains by shifting their investments from Bitcoin to altcoins, especially when the Bitcoin price stabilizes. This behavior can drive up altcoin prices and redistribute market capitalization towards these smaller cryptocurrencies.
Despite the strong performance of individual altcoins, several factors are holding back the broader altcoin season. The high price of Bitcoin may pose a barrier for new traders, who may prefer to invest in cheaper altcoins.
Additionally, for a full-fledged altcoin season to begin, a greater redistribution of market capitalization from Bitcoin to altcoins is necessary. This shift does not just depend on the performance of a few altcoins, but requires more widespread and consistent outperformance of Bitcoin among the top 50 cryptocurrencies.
Featured image from Pintu, chart from TradingView