Since the dust settled after the U.S. elections, the crypto market has surged, with BTC taking the lead and Memecoins following closely. Despite a brief pullback in BTC, ETH has changed its previous downtrend, and multiple sectors like DeFi and Layer 2 have seen a broad rally. Is the altcoin season about to start?
What is the exact signal that the altcoin season is coming?
Old coins have started to surge, and combined with the recent trend of funds flowing out of BTC, it indicates that the altcoin season has entered a period of brewing. This flow of funds often expands gradually with the accumulation of market sentiment, slowly driving some dormant old sectors to rally, allowing the altcoin season to develop from a few pioneering forces into deeper levels.
The exact signal comes from trading volume. The TOP 20 in mainstream CEX spot/contract trading volume are these new altcoins, and their rapid increase in trading volume is the next clear signal.
However, this altcoin season will be very different from previous ones. The logic of the altcoin season is the spillover of funds and wealth effects, but compared to the last cycle, VC investment scale has increased by orders of magnitude from 2021-2023, containing certain irrational components. Excessive investment, low financing valuations, and the exit demand from funds will also make the chip structure more unstable, ultimately transmitting to the secondary market. Therefore, this time the altcoin season is more favorable for fairly issued tokens or some highly liquid old tokens.
Currently, market innovation is mainly concentrated in the PayFi and stablecoin sectors, lacking application scenarios that can ignite the entire market like DeFi Summer. The absence of new narratives limits the imagination space for investors.
Institutional funds are currently mainly flowing into compliant products like ETFs, showing relatively limited interest in altcoins. In the absence of incremental funds to drive growth, the altcoin season may struggle to replicate its past glory.
Is the decline in meme popularity an opportunity for altcoins?
Market rotation. Funds always have speculative demands. Although people prefer to discuss fair narratives and anti-VC perspectives when memes are rising, after the leading sectors show signs of consolidation, funds flow back from high-volatility assets like memes to coins with relatively lower risk and more solid fundamentals, which is a main line of logic in crypto assets.
Previously, value coins and project coins were suppressed by the SEC under Gary Gensler's leadership, and speculative capital was hesitant to act recklessly, resulting in a 'M-shaped' pattern where large capital hoarded BTC while small retail investors speculated on meme coins and altcoins (project coins) were neglected. After the U.S. elections, Gary Gensler has announced his resignation under pressure, giving previously suppressed old altcoins a chance for revival.
Currently, memes are also experiencing a phase of correction. Especially for blue-chip and quasi-blue-chip memes, it doesn't seem to be at an end stage. The reason is simple: in a bull market, there is always sector rotation.
Trump is definitely the best spokesperson for this round of market trends and the next 4 years of crypto. This unprecedented 'traffic saint' will invisibly promote global market recognition of cryptocurrencies.
So aside from the coins related to the newly appointed officials of the U.S. government being hotly discussed, if traditional funds with large volumes start turning towards Web3, then the 'Old Money' representing mainstream institutions and high-net-worth individuals will prioritize selections, which, besides BTC, ETH, and SOL, may include altcoins that are very close to compliance or have various traditional investment tools, like those listed by Grayscale or other licensed exchanges in Hong Kong.
With the issuance of ETFs and Trump's election as president, the change in cryptocurrency regulatory landscape will bring more compliant funds and attention from leading companies in traditional industries to the crypto space, creating more opportunities for the integration of crypto assets, blockchain technology, and the traditional world. In this context, this round of altcoin season will showcase many projects that generate actual returns through compliance and partnerships with various fields in the real world, providing investors with decent returns.
What to layout in this round?
Mainstream coins (primarily BTC, with ETH, SOL, and BNB as supplements)
Meme coins (DOGE, Moodeng, Luce, AVA, RIF, ACT, etc.)
Everyone can configure their holdings (mainstream coins + memes) according to their own situation and hold them with conviction, thus achieving some excess returns while aligning with the fundamentals and the overall market.