With Bitcoin's rise this week, its price has neared $73,600, just under $200 away from the historical high. As of the time of writing this article, Bitcoin's dominance (BTC.D) has reached 60%, the first time it has reached 60% in nearly three years.
In previous articles from Huali Huawai, we mentioned that according to historical experience (data), when Bitcoin occupies the range of 65-70%, an altcoin season usually arrives, at which point some altcoins will start to surge in turn. Although historical experience cannot represent the present, and there are many changes that differ from previous cycles this time (for example, this bull market is mainly driven by ETFs, and the massive number of new projects has diluted liquidity, etc.), the arrival of the altcoin season is still something to look forward to.
A couple of days ago, a partner shared an OTHERS data indicator in the group.
From the indicators shared in the above image, this is a typical head and shoulders bottom pattern, and it seems to be forming the right shoulder. There could be a breakout point between positions (2) and (3). Once it breaks out, it's highly likely to pull back to position (4) before continuing upward to position (5).
Currently, the total market value of altcoins remains volatile, and overall, the altcoin season in this round of the bull market seems to be in a somewhat lagging state. So, when can we expect to see a new round of altcoin season?
The BTC.D indicator we mentioned above is considered by many as an important metric to gauge when the altcoin season will arrive. The basic logic behind this is quite simple: when Bitcoin's price is pushed up, some Bitcoin holders will start selling their Bitcoin for profit, and selling means they will hold a large amount of capital (USDT/USDC) afterward. This capital could potentially enter the altcoin sector for speculation, driving the prices of various altcoins back up, and this process will attract more on-exchange/off-exchange funds to join in the speculation, thus forming the altcoin season.
However, for retail investors, most are often late to the game. The process mentioned above tends to have a strong retrospective nature; in other words, when you notice Bitcoin's dominance starting to decline, altcoins have often already begun to rise. At this point, retail investors chasing in based on news hotspots often end up as bag holders because the rotation in the altcoin sector can happen very quickly.
So, how can retail investors avoid the situation mentioned above as much as possible?
First, focusing on the thought process:
The core idea here is to ensure that you can stay ahead of other retail investors by employing reliable methods across multiple dimensions. The specific application of these reliable methods may vary from person to person. For instance, I noticed some partners in the group are good at forming their own indicators, and some even assist their entry and exit decisions by observing the emotions and activity levels within groups of different attributes they join.
Secondly, focusing on strategy:
There are actually many reference factors in this regard. In addition to the BTC.D indicator and OTHERS indicator mentioned above, previous articles from Huali Huawai on the topic of altcoin season have also mentioned USDT.D, ETH/BTC exchange rate, TOTAL3, Altseason index, etc. Interested partners can search for and review historical articles.
Besides using various on-chain indicators for strategic assistance, macroeconomic factors are also crucial for us to study and focus on, such as US Net Liquidity (the US dollar net liquidity indicator is calculated by analyzing the Federal Reserve's balance sheet and other macroeconomic factors).
If we combine the TOTAL3-USDT-USDC data indicator with the US Net Liquidity indicator, we will find that changes in US dollar net liquidity can serve as a reliable reference indicator or signal for the altcoin season.
This is actually easy to understand; the liquidity of the cryptocurrency market mainly depends on US dollar liquidity. When US dollar liquidity is on the rise, as more funds flow into high-risk assets, altcoins tend to perform better. Conversely, when US dollar liquidity contracts, the market value of altcoins typically declines.
Therefore, by tracking US dollar liquidity, we can further understand the liquidity situation of the cryptocurrency market, helping to judge the potential timing of the altcoin season. Of course, liquidity data indicators can be viewed by anyone, but we need to understand that these indicators also have a lagging nature and should be considered alongside policies (Federal Reserve monetary policy).
Generally speaking, the Federal Reserve's policy changes take about 4-8 months to fully reflect in the market. For example, in May of this year, the Federal Reserve adjusted its balance sheet reduction plan, announcing a decrease in the monthly cap for Treasury bond reductions from $60 billion to $25 billion starting in June (note: slowing down the reduction means decreasing the speed of capital recovery, which helps keep funds ample in the market). This serves as a potential signal for a policy shift, and theoretically, starting in September of this year, we might observe some positive responses in the market. One can compare the performance of the US stock market or cryptocurrency market since September.
Next, we need to pay close attention to the Federal Reserve's two upcoming FOMC meetings, which will take place on November 6-7 and December 17-18. If the Federal Reserve announces a continued interest rate cut at that time, it will be a new clear signal, and we might expect greater market opportunities in the near future.
In short, by paying attention to some on-chain indicators, US dollar liquidity, and the Federal Reserve's monetary policy, we can help ourselves anticipate market trends, including the timing of the potential arrival of the altcoin season.
However, it is essential to remind again that while we mentioned that the arrival of the altcoin season is something to look forward to, this does not mean that all altcoins will have opportunities for explosive growth. The main reason behind this has also been mentioned in previous articles from Huali Huawai regarding altcoin topics. Here, let's briefly recap:
- The number of projects born in this cycle is too many, even to the point of being described as massive, which will lead to a severe dilution of liquidity. Even if we can welcome a new round of so-called altcoin season, only a portion of tokens might have the opportunity to break through, and we should recognize this broader trend of the altcoin season.
- This round of the bull market is mainly driven by ETF inflows. The inflow/outflow of ETF funds is more about emotional influence. This part of the capital can be classified as off-exchange funds, which will not directly (or entirely) flow into the altcoin market.
- Many VC projects born in this round start with low circulation and high FDV. The project parties and institutions have been offloading and cutting leeks, and retail investors continue to be trapped. It seems difficult to push prices up (even if they do, it will just be pushing while offloading; the project parties have no vision at all). Rather than spending a lot of money to push prices up, it would be better for project parties to start a new project to cut leeks again.
- The narrative of MemeCoin in this cycle has captured the attention of almost all retail investors, many of whom may prefer to play with lower market cap and higher odds tokens.
- Regarding some old coins from the previous cycle, it is harder to push them up due to a large number of trapped investors. If the project party were to raise prices, it would give trapped investors a chance to exit, and they are unlikely to make such foolish trades. This serves as a reminder to everyone not to be obsessed with any altcoins; it's best to take profits and secure them (at least withdraw the principal) or continue to exchange for Bitcoin.
As described by partners in the group: last year, as long as you entered a new track early, you could make money, but this year it is hellishly difficult. In the mid-to-late stage of the bull market, things often seem crazy, and it looks like everyone is easily making money, but in the end, you'll find that the number of people losing money is actually higher.
We have reason to believe that in the next year or so, the cryptocurrency market will become more interesting. Before the end of this year, we might continue to face BTC time (but the market is volatile, and there may be new large fluctuations in the next two weeks, so beware of leverage). Next year (2025), in the first or second quarter, we might welcome Altcoins time. If you are not disappointed or discouraged about this round of the bull market, please continue to focus on accumulating and holding your most favored positions, while also considering planning your bull market exit strategy.
We will share here for this issue, and more articles can be viewed through the Huali Huawai homepage. The above content is just a personal perspective and analysis, only for learning records and communication, and does not constitute any investment advice.
