Altcoin season ahead? Decoding the market trends and predictions

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

In recent weeks, the cryptocurrency market has experienced critical shifts and kept everyone on edge. The turmoil began when the bankrupt Mt. Gox exchange began repaying its creditors, causing a sharp drop in Bitcoin (BTC) prices and causing widespread panic, fueling speculation that the bull run may be over.

Adding to the uncertainty, the German government launched a massive sell-off of crypto assets, sending BTC prices plummeting to around $53,700 as of July 5.

Despite all this negativity, Bitcoin has returned to the $58,000 level as the market absorbs the shocks from both the Mt. Gox refunds and the sell-off in Germany.

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.

The aftermath of the attack was a catalyst for speculations around Trump’s possible political comeback and its positive implications for the cryptocurrency market.

As a result, Bitcoin’s price rose from $58,000 to over $63,000 on July 14, briefly touched $65,000 on July 16, and settled at $64,937 at the time of writing.

BTC one-week price chart | Source: TradingView

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

The U.S. Securities and Exchange Commission (SEC) has given preliminary approval to at least three of eight asset managers looking to launch spot ETH ETFs. Final approval is contingent on S-1 filings being filed with 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 for these new products set to begin the following day, July 23.

Update: Nate’s instincts were correct, heard the SEC finally got back to issuers today, asking them to return FINAL S-1s (including fees) on Wednesday and then request a TUESDAY 7/23 LAUNCH after the close on Monday. This was achieved without any unforeseen last minute issues, of course! https://t.co/D21FD9Qf94

— Eric Balchunas (@EricBalchunas) July 15, 2024

As these events create ripples in the cryptocurrency market, the big question is: What does this mean for altcoins? Are we on the verge of an altcoin season or will BTC and ETH continue their dominance?

Let’s examine the data and market sentiment to reveal whether altcoin season is indeed around the corner.

Altcoin dominance takes a hit

The altcoin market has been following a very volatile course lately and it is necessary to look at some important data to understand what is going on.

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

BTC long-term dominance chart | Source: TradingView

On the other hand, altcoin dominance (excluding the top 10 coins by market cap) 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 an all-time high, altcoin dominance fell again to around 10.27% on July 16.

Altcoins long-term dominance chart | Source: TradingView

Ethereum has been the main driver behind increases in altcoin dominance. When ETH prices have risen, altcoin dominance has followed, but other altcoins have not seen the same level of interest or investment.

We can see this dynamic 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, are outperforming BTC.

In October 2023, the crypto market took off and altcoins gained strength. The index rose from 16 to a peak of 84 in January 2024, indicating the start of an altcoin season.

Altcoin seasonal index | Source: Blockchaincenter.net

However, the momentum of spot BTC ETFs pushed altcoins aside and the index fell to 16 in June 2024. Recently, when BTC lost some momentum, the altcoin market recovered and the index rose to 46, recording the fastest rise since January.

But Mt. Gox charges and fears of a sell-off in Germany quickly dragged the market back down, with the index falling to 33 as of July 16.

Ethereum has played a major role in these movements. Data shows that when Ethereum prices increase, the Altcoin Seasonality Index also increases, suggesting that Ethereum is a major booster for the entire altcoin market.

For a true altcoin season to begin, this index needs to remain stable above 75 for several weeks or months. Until that happens, Bitcoin will likely continue to dominate, with Ethereum playing a significant supporting role.

Is altcoin season approaching?

Most of the speculations around altcoins revolve around upcoming events and historical patterns observed in the cryptocurrency market.

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

I know when the altcoin season will start.

And I’ll show you👇

◾Halving

It all comes down to this. Wait, what???

Yes, you read that right.

Once the halving occurs, BTC ATH will occur 1-1.5 years later.

And around this time, ETH and other altcoins are experiencing an explosion.

3rd halving—November 9th… pic.twitter.com/xQK9ZtZiB7

— Wise Advice (@wiseadvicesumit) July 11, 2024

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

Similar patterns were observed in previous halving events where altcoins like Solana (SOL), Polkadot (DOT), and Avalanche (AVAX) also saw their ATHs following Bitcoin’s rally.

The basic mechanism behind this model is the flow of money into the market. Initially, investors flock to Bitcoin and drive its price up. As Bitcoin investors make profits, they often reinvest in Ethereum and other altcoins. Due to the low market cap of these altcoins, even a relatively small inflow of capital can lead to significant price increases.

The investment cycle from Bitcoin to Ethereum and then to smaller altcoins leads to a temporary decline in Bitcoin’s dominance, leading to altcoin rallies and eventually altseason.

Meanwhile, Glassnode co-founder Yann Allemann stated that in the recent market rotation, riskier stock assets have outperformed more stable ones, and this could be a harbinger of a similar change in the cryptocurrency market.

Is a rotation coming?

We saw how it was yesterday #Nasdaq >2% down – #IWM It recorded an increase of >3%.

This is a clear indication of Rotation – a shift into riskier assets.

Will we see that too? #BTC And #Alternatives?

Well – we had a day like yesterday in November 2020. IWM rose and… pic.twitter.com/WG9pooRxh1

— 𝗡𝗲𝗴𝗲𝗻𝘁𝗿𝗼𝗽𝗶𝗰 (@Negentropic_) July 12, 2024

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

While these forecasts paint a promising picture, it is important to approach them with caution. The market is volatile by nature, and while there are opportunities for gain, they also come with risks that should not be ignored.

Always do your research, be informed, and avoid making decisions based solely on advertising.

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