According to Blockworks, the concept of 'Small Cap Summer' may signify the peak of the current bull market, akin to deep ocean waves that eventually trigger an altcoin season. In the stock market, 'small cap' refers to companies with a market capitalization between $250 million and $2 billion. This categorization can be applied to the crypto market, where tokens are sorted based on their trading history over the past three years. For instance, Stacks has traded in the mid-cap range for only 31% of its trading days since August 2021, placing it in the small-cap category.

Currently, the crypto market has only two mega-cap assets, bitcoin and ether, and five large-cap assets, including BNB, Solana, XRP, Dogecoin, and Cardano. There are around two dozen mid-cap assets such as Polygon, Filecoin, Cronos, Monero, and Chainlink. The majority, 143 tokens, fall into the small-cap category, including Pyth, DYDX, Worldcoin, Blur, Ondo, Helium, Celestia, and Bittensor. These small-cap tokens have mostly traded between $250 million and $2 billion in market capitalization over the past three years.

The start of 'Small Cap Summer' is not formally defined, similar to the ambiguous definition of an altcoin season. One possible indicator is when the collective market value of small-cap tokens surpasses that of mid-caps. This has not occurred since April 2022. However, the gap is narrowing, with small caps currently valued at $93.6 billion compared to $115.2 billion for mid-caps, a 19% difference down from over 30% in August 2023. Despite losing ground to large-caps this year, there is optimism as some small-cap tokens have shown significant performance.

Memecoins like MOG, BRETT, and NOTCOIN, along with Zcash, Helium, and ENS, have outperformed bitcoin and ether since May. These tokens have seen substantial gains while bitcoin and ether have slightly declined. Although only six out of 143 small-cap tokens have demonstrated notable strength during a bitcoin correction, this could signal the beginning of 'Small Cap Summer.' The performance of these tokens may inspire a broader rally among small caps, potentially marking the start of a new phase in the crypto market.