On-chain data assessment model - Altcoin season
One day I was in class, and Xiao Chi @FC_0X0 sent me a WeChat message saying: 'There is a piece of data, which is the scissors difference between the total inflow of stablecoins into exchanges and the dollar value of BTC withdrawn, i.e., the remaining potential purchasing power may have a direct relationship with the volatility of altcoins.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 altcoin launches?'
Coincidentally, my course materials also mentioned the data observation of the potential conditions for 'capital overflow', which just corresponds to the timing of certain large-cap altcoin launches. However, at that time it was only a rough outline, and I vaguely thought of some previously overlooked places...
After returning, I organized the data and, inspired by Xiao Chi's thoughts, rethought a set of visual indicators that can effectively judge the 'altcoin season'. Below, I share my thoughts:
Altcoin season condition 1: Capital overflow condition assessment
(Figure 1)
In Figure 1, green indicates whether the total scale of stablecoins flowing into exchanges within 30 days is greater than the dollar value of BTC withdrawn from exchanges. If so, it means that these funds not only buy BTC but also have the possibility of overflowing into altcoins. The higher the green signal bar, the greater the theoretical overflow value, thus having more preconditions for the start of the altcoin season.
Data shows that during the periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical overflow value is the highest, indicating a greater possibility of generating an 'altcoin season' during these two periods. Additionally, there is a small segment between August and September, but both in terms of scale and duration, it is not as significant as the above two periods, thus relatively weaker in influence.
Altcoin season condition 2: Capital inflow into mainstream assets
(Figure 2)
Historically, BTC often leads the overall sentiment in the crypto market, followed by market confidence flowing to other large-cap mainstream coins, and finally tilting further towards ALT. A tool to visualize this capital rotation is to use the realized market capitalizations of BTC and ETH and the total supply of stablecoins over 30 days (as shown in Figure 2). When all three major mainstream assets show net capital inflows, it is considered that market sentiment begins to heat up, and the overall risk appetite rises, which is also one of the macro necessary conditions to start the altcoin season.
Data shows that during the periods of 2023.10-2024.8 and 2024.10-2024.12, the three major mainstream assets simultaneously experienced net capital inflows, peaking in March and December 2024. This is also the most FOMO point of market sentiment so far in this cycle.
Altcoin season judgment 3: Positive momentum of altcoin market capitalization dispersion
(Figure 3)
The data basis for judging the start of the altcoin season also requires a third condition, namely isolating positive momentum in the dispersion of the total market capitalization of altcoins. We need to find periods where the total valuation of the 7D SMA within the altcoin range is greater than its 30D SMA total valuation. Because this can represent that the valuation of altcoins is amplifying in the short term, and the liquidity flowing into altcoins is rapidly increasing.
In Figure 3, red represents the 7D average, and blue represents the 30D average; data shows that 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 market is starting to tilt towards altcoins, and the market capitalization of altcoins is entering a phase of positive momentum growth.
Summary
The above three conditions are considered from different angles, where condition 1 represents the possibility of capital overflow; condition 2 represents overall sentiment and risk appetite; condition 3 represents liquidity tilt. When all are met simultaneously, it is highly likely that the altcoin season is coming.
Current condition 2 is met, but 1 and 3 are not; thus, we can consider that the basis for launching the altcoin season is present, but liquidity is still concentrated in 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 need to be patient a little longer, 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 as investment advice.
