As Bitcoin (BTC) strives to maintain a price level of $100,000, altcoins have the opportunity to become stronger. This is a common phenomenon in the cryptocurrency market: when BTC's price rises, most altcoins maintain their prices, and vice versa. This reflects the capital rotation pattern in the cryptocurrency market.

The altcoin season index has consistently shown that the market is in an altcoin season over the past two weeks, but at the time of writing, the index has dropped to 71.

However, this does not mean the cycle has ended and it's time to sell—far from it.

Stablecoins—an important component of the crypto ecosystem

Stablecoins play a crucial role in the cryptocurrency ecosystem. They provide a safe haven against volatility, increase market liquidity, and support DeFi activities. The increase in stablecoin inflows to exchanges is an optimistic signal, indicating that purchasing power is strengthening.

In the past three months, the reserves of Tether (USDT) on exchanges have surged.

Reflecting on 2020-2021, the increase in reserves of one of the most popular stablecoins, Tether, coincided with the market entering the real altcoin season. Issuing stablecoins and transferring them from reserves to centralized exchanges not only enhances liquidity but also facilitates large trades, serving as "ammunition" for major investors.

The reserve growth in February 2021 is similar to the trend over the past two months, indicating that the real altcoin season may not have arrived yet. In the last cycle, this happened in May and November 2021. This time, we may have to wait until the second and fourth quarters of 2025 to see similar explosive growth.

2025 Market Cap Target

Compared to the peak in 2018, the market cap of altcoins (excluding ETH and BTC) has reached 223.6% Fib extension, equivalent to $1.12 trillion in 2021. Similarly, based on bullish data from 2021, the market cap target for 2025 at 223.6% Fib extension would be $3.47 trillion.

If the previous cycle repeats, the market cap of altcoins could reach this level within the next 10 months. After the U.S. tax season ends in April, any tax-related selling may ease, allowing investors to return to the market and driving prices up at the start of summer.

"Sell in May and go away" also applies to the cryptocurrency market. However, one should not overly rely on historical evidence, as each summer brings different outcomes. It is advisable to plan to sell some assets in May and November, while closely monitoring long-term trends.

What is the short-term market outlook?

There has clearly been little profit-making effect in the past few days, with only Bitcoin struggling to support itself. Bitcoin's support stems from the spillover effect from Microstrategy being added to the Nasdaq 100 on Monday, and ETFs are expected to continue inflowing. Additionally, next week, the Federal Reserve is likely to complete a rate cut in December (the probability is nearing 100%), so before a real pullback occurs, it is still possible to see another new high, but the height is not worth expecting.

For Ethereum, it hasn't moved much this round, but a rebound past 4000 shouldn't be far off.

For altcoins, one can consider positioning in Ethereum-related projects, restaking, layer 2, and DeFi categories that all have opportunities to follow ETH's strength.

As for whether altcoins can experience a widespread surge, it may be necessary to pay attention to whether major liquidity-absorbing players like XRP and DOGE can achieve new highs in the short term to release liquidity, or if ETH's rise can also release liquidity.

It will take time before the next risk release, but we are basically entering a phase where we seek good targets, focusing on short-term trades with stop-losses.