1️⃣ Bitcoin Dominance (BTC.D)
Current BTC dominance: Bitcoin dominance is 55.74%. Historically, when Bitcoin dominance increases, it signals that market participants favor Bitcoin over altcoins, as they see BTC as a safer investment. Conversely, when BTC dominance decreases, investors often move to altcoins, which can signal the start of an altcoin season.
Historical dominance: From the second image, it is clear that Bitcoin dominance has declined over time, but fluctuations in dominance correlate with investor sentiment. When BTC dominance falls below 40% during major bull markets (as seen in 2021), altcoins have surged. If BTC dominance continues to fall below key support levels, we could be headed for an altcoin season.
2️⃣ Altcoin Season Index
Key elements:
Altcoin Season (Above 75 on the Index): This is when 75% of the top 50 altcoins outperform Bitcoin over the past 90 days. The market enters altcoin season when the index crosses 75.
Bitcoin Season (Below 25 on the index): This is when Bitcoin outperforms most altcoins and the market focuses on Bitcoin. When the index is below 25, it is considered Bitcoin season.
Current situation:
Current Value: 29: This shows that the market is not completely in Bitcoin season but is leaning towards Bitcoin dominance. However, it is not completely in Altcoin season either.
Last Altcoin Season Level: ~75: The last altcoin season was when the index hit around 75. Since then, the altcoin market has fallen significantly from that peak.
Data-based observation:
Recent trends:
The index fluctuates between Bitcoin and altcoin dominance, but there has been no clear breakout above 75 since its recent peak.
There was a noticeable decline from the altcoin season level (~75) back to the lower range, indicating a shift towards Bitcoin dominance.
The index is currently hovering near Bitcoin season territory, meaning Bitcoin has outperformed altcoins recently, albeit not overwhelmingly.
Historical sample:
In previous cycles, altcoin seasons have typically followed periods of strong Bitcoin dominance. When Bitcoin reaches a certain level of strength, capital typically flows into altcoins, creating a bull run.
In the chart, after each drop below 25 (Bitcoin season), the market eventually moves into altcoin season (above 75). This cyclical behavior is consistent.
Consolidation period:
The chart shows the market is in a consolidation phase between Bitcoin and Altcoin dominance. The index recently dropped below 30, signaling a possible early stage of Bitcoin dominance, but not yet fully entrenched.
Forecast:
When Can Altcoin Season Start?
Short-term outlook (next 1-3 months): Based on the current consolidation near 30, this suggests that we are not yet in alt season. Historically, alt season follows significant Bitcoin performance, which seems to be happening now. Bitcoin could continue to outperform until the index drops to near 20-25.
Altcoin Season Triggers: As Bitcoin ends its dominance cycle and stabilizes (or starts losing market share), money may start flowing into altcoins again, pushing the index above 75. This could happen if Bitcoin encounters resistance or corrects after a strong rally.
Prediction:If Bitcoin's dominance continues for a few more weeks or months, we could see the start of an altcoin season in early 2025. However, the exact timing depends on Bitcoin's performance and the rate at which capital flows into altcoins.
3️⃣ Altcoin Market Capitalization Compared to Bitcoin
Total Cryptocurrency Market Cap: The total market cap is currently $1.92 trillion, down 10.58%. Bitcoin has dominated the market, but if the overall cryptocurrency market stabilizes or increases in the coming months without significant Bitcoin price dominance, it could signal that altcoins are attracting more capital inflows.
Market Volatility & ETF News Impact: The $170 million ETF outflow on September 6 could be a sign that institutional investors are temporarily pulling out of Bitcoin. If this capital is reallocated to altcoins, it would further strengthen the theory of an upcoming altcoin season.
4️⃣ Volume Trend
Altcoin Volume Drops (down 54.66%): In the image, altcoin trading volume has dropped significantly. During an altcoin season, we often see a spike in altcoin volume as retail traders flock to them for higher returns. Keep an eye on volume changes on major altcoins like Ethereum, Solana, and others as an early indicator of a change.
5️⃣ Macroeconomic Factors
Macroeconomic factors play an important role in shaping the cryptocurrency market, especially when it comes to inflation, interest rates, and exchange-traded fund (ETF) adoption. Understanding these factors can provide insight into potential shifts in investor sentiment and capital flows.
Inflation and interest rates
Inflationary Trends: As inflation rates begin to decline, riskier assets like altcoins may benefit more than Bitcoin, which is often considered a “store of value.” Lower inflation could lead to increased consumer spending and investment in riskier assets as investors seek greater returns. For example, if inflation falls to around 2%, that could signal a more favorable environment for altcoins, which typically thrive during economic recovery periods.
Interest Rate Hikes: Central banks’ decisions on interest rates have a significant impact on market dynamics. If the Federal Reserve or other central banks lower interest rates, this can lead to increased liquidity in the market. This environment often encourages investment in riskier assets, including altcoins. For example, a 25 basis point cut in interest rates can stimulate capital flows into altcoins, as investors seek higher returns than traditional savings or fixed income investments.
ETF Approval and Institutional Interest
Impact of Bitcoin ETF Approval: The approval of a Bitcoin spot ETF in January 2024 marks a major milestone for the cryptocurrency market. This development has attracted institutional investors who were previously hesitant due to regulatory concerns. The inflow of capital from these investors contributes to increased liquidity and stability in the market. Analysts predict that Bitcoin ETF inflows could reach $9 billion in the coming years, which will not only boost the price of Bitcoin but also create a ripple effect across the entire cryptocurrency market.
Shift in institutional interest: Initially, the approval of a Bitcoin ETF could result in significant inflows into Bitcoin. However, once the initial excitement dies down, capital could begin to flow into altcoins. This shift is particularly relevant as institutional investors diversify their portfolios to include more cryptocurrencies. For example, analysts expect a 10-15% increase in altcoin allocation following the approval of a Bitcoin ETF, driven by the search for higher returns and diversification.
Validation and Market Confidence: Bitcoin and Ethereum ETF approvals increase the legitimacy of cryptocurrencies in the mainstream financial system. This validation boosts investor confidence, leading to increased participation from both retail and institutional investors. As confidence increases, capital flows into altcoins are likely to increase, further supporting their growth. For example, following the approval of an Ethereum ETF in May 2024, Ethereum prices surged 15%, reflecting increased market enthusiasm.
6️⃣ On-Chain Metrics
Ethereum Gas Fees: Low $ETH gas fees indicate that demand for De-Fi and NFT activities is currently lower. However, when gas fees start to increase due to higher network activity, this usually means that the altcoin market is heating up.
7️⃣ Past Cycles and Trend Patterns
Historically, after Bitcoin sees its biggest gains in a bull run, investors start looking for higher risk/reward in altcoins. If we look at the trends from the 2017 and 2021 bull runs, altcoin seasons tend to follow strong Bitcoin rallies. Since Bitcoin is rising in the current trend but dominance has not spiked yet, an altcoin rally could be forming as BTC consolidates.
Conclusion: Altcoin Season Is Coming?
BTC Dominance: The slight increase in BTC dominance, coupled with low volume and bearish market sentiment (Fear at 35 on the Index), suggests that we are still in a Bitcoin-centric phase. However, if Bitcoin dominance drops below 50% and we see a spike in trading volume for altcoins, it could be the start of an altcoin season.
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