Original author: Murphy, on-chain data analyst
On-chain Data Evaluation Model - Altcoin Season
One day, while I was in class, Xiaochi @FC_0X0 sent me a WeChat saying: 'There is a data point, which is the gap between the total inflow of stablecoins into exchanges and the dollar value of BTC taken out, that the remaining potential purchasing power may have a direct relationship with the volatility of altcoins. Can we look at the timing of the altcoin launch through this logic?'
Interestingly, I also mentioned observations of potential conditions for 'capital overflow' in my presentation, which correspond to the timing of certain large-cap altcoins. However, at that time, it was only a rough outline, and I vaguely seemed to think of some previously overlooked areas...
Upon returning, I organized the data and, inspired by the thoughts provided by Xiaochi, rethought a set of visualization indicators that can effectively judge the 'Altcoin Season'. Below are my thoughts:
Altcoin Season Condition 1: Evaluation of Capital Overflow Conditions
(Figure 1)
In Figure 1, green indicates whether the total size of stablecoins flowing into exchanges within 30 days is greater than the dollar value of BTC withdrawn from exchanges. If so, it means that besides buying BTC, there is a possibility of overflow into altcoins. The higher the green signal bar, the greater the theoretical overflow value, thus increasing the prerequisites for starting the Altcoin Season.
From the data, during the two periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical overflow value is the highest, which means that the likelihood of a 'Altcoin Season' occurring during these two periods is greater. Additionally, there is a small period between August and September, but both in terms of scale and duration, it is not as significant as the above two periods, so its impact is relatively weaker.
Altcoin Season Condition 2: Capital Inflow of Mainstream Assets
(Figure 2)
Historically, BTC often leads the overall sentiment in the crypto market, with market confidence subsequently flowing into other large-cap mainstream coins, and finally further tilting towards ALTs. A tool to visualize this capital rotation is using the realized market cap of BTC and ETH along with the 30-day changes in the total supply of stablecoins (as shown in Figure 2). When all three mainstream assets show net capital inflow, it is regarded as the market sentiment beginning to surge, with overall risk appetite rising, which is also one of the macro necessary conditions for starting the Altcoin Season.
From the data, during the two periods of 2023.10-2024.8 and 2024.10-2024.12, all three major mainstream assets show net capital inflow, peaking in March and December 2024. This is also the point in this cycle so far where market sentiment is the most FOMO.
Altcoin Season Condition 3: Positive Momentum Discrepancy in Altcoin Market Capitalization
(Figure 3)
The data basis for judging the start of the Altcoin Season also requires a third condition, namely isolating positive momentum in the dispersion of total altcoin market capitalization. We need to find periods where the total valuation of the 7D SMA within the altcoin range is greater than its 30D SMA total valuation. This can represent a short-term amplification of altcoin valuations, and liquidity flowing into altcoins is rapidly increasing.
In Figure 3, red represents the 7D average, and blue represents the 30D average; from the data, during the two periods of 2023.10-2024.4 and 2024.11-2024.12, the red line crosses above the blue line, indicating that liquidity in the crypto space is beginning to tilt towards altcoins, and the market capitalization of altcoins is shifting into a positive momentum growth phase.
Summary
The above three conditions are considered from different angles; Condition 1 represents the possibility of capital overflow; Condition 2 represents overall sentiment and risk appetite; Condition 3 represents liquidity tilt. When all are satisfied, the likelihood of the Altcoin Season arriving is high.
Currently, Condition 2 is met, but Conditions 1 and 3 are not; therefore, we can consider that the foundation for starting the Altcoin Season is present, but liquidity is still concentrated in mainstream assets (especially BTC), and there hasn't been much overflow of funds into altcoins.
However, we can also see that the 'negative overflow' in Condition 1 is slowly narrowing, which is a positive signal. Although the anticipated Altcoin Season may still require some patience, what is meant to come will come.
The content shared in this article is for communication and research purposes only and is not investment advice.
Original link