The cryptocurrency market could be on the verge of the much-awaited altcoin season (altseason), much to the delight of speculative traders, but the determining factors might have changed, according to a prominent market analyst.
“Stablecoin liquidity” to determine next altseason
The crypto market is transforming, with cycle indicators, market structures and trading patterns changing rapidly.
“Altseason is no longer defined by asset rotation from Bitcoin,” CryptoQuant CEO Ki Young Ju said in a Dec. 2 post on X.
According to Young JU, the traditional signal marking the beginning of an altcoin season where capital rotates from Bitcoin (BTC) to altcoins is outdated. Instead, altcoin trading volume has become more prevalent against stablecoin and fiat currency pairs, not BTC.
For example, the combined altcoin trading volume for Bitcoin pairs has remained significantly low over the last few weeks despite an uptick in Ether (ETH) price over the same period. Moreover, several altcoins, such as XRP (XRP) and Solana (SOL), are near their all-time highs, while Bitcoin price has been consolidating below $100,000.
Meanwhile, the chart below on the right shows a spike in the aggregate altcoin trading volume for stablecoin pairs, which has increased in tandem with growth in ETH price.
This reflects “real market growth rather than asset rotation,” Ki explained.
Aggregate altcoin trading volume for BTC and stablecoin trading pairs. Source: CryptoQuant
This change suggests a deeper, more sustainable evolution in the crypto market, driven by stablecoins' increased liquidity and stability.
“Stablecoin liquidity better explains the altcoin markets.”
Ki adds that the nature of capital flowing into Bitcoin has shifted compared to previous market cycles. Unlike the retail-driven capital flows in previous bull cycles, the current bull market is primarily driven by institutional capital flows into spot Bitcoin exchange-traded funds (ETFs).
Source: Ki Young Ju
Meanwhile, the market capitalization of all cryptocurrencies, excluding BTC, remains well below its current all-time high, indicating reduced fresh liquidity from new exchange users.
“For altcoins to reach a new all-time high market capitalization, they will require a significant influx of fresh capital to crypto exchanges.”
Altseason is close
The performance of the altcoins seemingly coincides with an improvement in the altcoin season index, indicating that the altcoin season is close. According to this index by Blockchain Center:
“If 75% of the top 50 coins performed better than Bitcoin over the last season (90 days), it is Altcoin Season.”
Altcoin season index. Source: Blockchain Center
This indicator essentially demonstrates that 73% of the leading 50 altcoins have outperformed Bitcoin in the past 90 days. Since this index has increased sharply over the last few days, it is edging closer to the 75% threshold.
With multiple top-cap cryptocurrencies challenging new highs, market participants should watch the stablecoin liquidity and the Bitcoin dominance index, which could be signalling the beginning of an altcoin season over the next few days.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
