The foundation for starting the altcoin season is present, but current liquidity is still concentrated on BTC, and there hasn't been much overflow of funds into altcoins.
Original author: Murphy, on-chain data analyst. On-chain data assessment model - Altcoin season. One day while I was in class, Xiao Chi (@FC_0X0) sent me a WeChat message saying: "There's a piece of data, which is the scissor difference between the total inflow of stablecoins to exchanges and the USD value of BTC withdrawn, meaning the remaining potential purchasing power may have a direct relationship with the volatility of altcoins. Can we use this logic to look at the timing of the altcoin season?" Coincidentally, my lecture materials also mentioned the observation of potential conditions for "capital overflow," which corresponded nicely with certain large-cap altcoins' starting time points. However, at that time, it was just a rough outline, and I vaguely thought of some previously overlooked areas... After returning, I organized the data based on the inspiration from Xiao Chi and rethought a set of visual indicators that can effectively judge the "altcoin season." Here are my thoughts: Altcoin season condition 1: Capital overflow condition assessment (Figure 1). In Figure 1, the green indicates whether the total scale of stablecoins flowing into exchanges in the past 30 days is greater than the USD value of BTC withdrawn from exchanges. If so, it means that besides buying BTC, there is also the possibility of overflow into altcoins. The higher the green signal bar, the greater the theoretical overflow value, thus having more preconditions for starting the altcoin season. From the data, during the periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical overflow value is at its maximum, which indicates a higher likelihood of producing an "altcoin season" during these two periods. Additionally, there was a small segment between August and September, but in terms of scale and duration, it is not as significant as the above two periods, and thus relatively weaker in influence. Altcoin season condition 2: Capital inflow of mainstream assets (Figure 2). Historically, BTC often leads the overall sentiment in the crypto market first, followed by market confidence flowing towards other large-cap mainstream coins, and finally tilting further towards ALT. The tool to visualize this capital rotation uses the 30-day changes in the realized market caps of BTC and ETH along with the total supply of stablecoins (as shown in Figure 2). When all three mainstream assets show a net capital inflow, it indicates that market sentiment starts to become exuberant, with an overall increase in risk appetite, which is one of the macro necessary conditions for starting the altcoin season. From the data, during the periods of 2023.10-2024.8 and 2024.10-2024.12, all three major mainstream assets appeared to have net capital inflow simultaneously, peaking in March and December 2024. This is also the point in this cycle so far where market sentiment has been the most FOMO. Altcoin season condition 3: Positive momentum of the dispersion of altcoin market cap (Figure 3). The data basis for determining the start of the altcoin season requires a third condition, which is isolating positive momentum within the dispersion of the total market cap of altcoins. We need to find periods where the total valuation of the 7-day SMA within the altcoin range is greater than its 30-day SMA total valuation. This represents that the valuation of altcoins is expanding in the short term, and liquidity flowing into altcoins is rapidly increasing. In Figure 3, the red line represents the 7-day average, while the blue line represents the 30-day average; from the data, during the 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 starting to tilt towards altcoins, with the market cap of altcoins entering a phase of positive momentum growth. To summarize the above three conditions, they are thought 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 three are met simultaneously, it is highly likely that the altcoin season is approaching. Currently, Condition 2 is satisfied, but Conditions 1 and 3 are not; we can consider that the foundation for starting the altcoin season is present, but liquidity is still concentrated on 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 shrinking, which is a positive signal. Although the altcoin season that everyone is looking forward to 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 should not be considered investment advice.

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