After falling below $800 billion early last month, the altcoin market capitalization has now started to see a recovery since the start of October. In particular, over the past few days, the global altcoin market capitalization has seen a gradual increase with the current valuation standing at $906 billion, at the time of writing.

Altcoin season has arrived?

Amid these developments, a crypto analyst known as Mustache on X, suggested that altcoin season may be approaching.

In a recent post, Mustache shared that the Altcoin Season Index, which measures the relative performance of altcoins against Bitcoin, appears to be forming a bullish Inverse Head & Shoulders pattern.

This pattern, considered a strong indicator in technical analysis, is approaching a breakout point that could lay the groundwork for significant movement in the altcoin market.

Mustache stressed that the coming weeks and months could bring great opportunities for profits, as the index completes a bullish pattern and potentially initiates a trend reversal.

In the context of technical analysis, the Inverse Head & Shoulders pattern is considered a bullish signal, usually indicating a reversal in a downtrend.

The pattern typically consists of three bottoms: a “head” between two “shoulders,” with the head being the lowest point.

When price breaks the neckline created by connecting the peaks of the two shoulders, it usually signals a potential upside breakout.

For the altcoin market, this breakout could mean a transition from the current consolidation to a more extended rally, fueling significant growth in many different altcoins.

Mustache's observation that the Altcoin Season Index fits this pattern suggests that market sentiment may soon favor altcoins over Bitcoin, indicating a capital flow shift.

However, while these technical indicators are encouraging, it is also necessary to look at the performance of individual altcoins to gauge broader market moves.

To understand the potential for an altcoin market recovery, it is important to analyze specific altcoins, like Chainlink (LINK), which is among the top 20 cryptocurrencies by market capitalization.

Despite a 5.5% drop over the past week, LINK remains overall bullish, having gained 16.3% over the past month.

Furthermore, LINK has shown positive movement over the past 24 hours, with a price increase of around 2% to $11.56.

Digging into the fundamentals of LINK reveals important information about the altcoin's sentiment and market performance.

Data from Glassnode highlights a declining trend in LINK active addresses, a key metric indicating consumer engagement.

After peaking at 5,738 active addresses in August, the number has dropped to around 1,809. This drop suggests a decline in consumer activity and participation, which may reflect broader trends in altcoin consumer participation.

However, LINK’s open interest offers a more optimistic view. According to data from Coinglass, LINK’s open interest has increased by about 4%, reaching a valuation of $165.86 million.

Open interest volume, which tracks the total number of open positions on derivatives contracts, also increased 31.96% to $198.27 million.

The increase in open interest could indicate that investor interest and confidence in the asset is growing, potentially supporting the broader argument for an upcoming altcoin season.