With the recent rise in Bitcoin, its price has approached nearly $73,600, just under $200 away from its historical high. As of the writing of this article, Bitcoin's dominance (BTC.D) has reached 60%, the first time it has reached 60% in nearly three years. As shown in the image below.
In previous articles on Hua Li Hua Wai, we mentioned that based on historical experience (data), when Bitcoin reaches the range of 65–70%, it usually heralds the arrival of the altcoin season, at which point some altcoins will start to surge. Although historical experience does not represent the present, and this cycle has many changes differing from previous cycles, such as this round of the bull market being primarily driven by ETFs and the emergence of a massive number of new projects diluting liquidity, 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, as shown in the image below.
From the indicators shared in the image above, this is a typical head and shoulders bottom pattern, and it seems to be forming the right shoulder. A breakout point may occur between positions (2) and (3), and once it breaks out, there is a high probability it will retrace to position (4) and then continue upward to position (5).
Currently, the total market cap of altcoins remains volatile. Overall, the altcoin season in this round of the bull market seems to be in a relatively lagging state. So, when can we welcome a new round of altcoin season?
The BTC.D indicator we mentioned earlier is seen by many as an important gauge for when the altcoin season will arrive. The underlying logic here is quite simple: when Bitcoin's price is pushed up, some Bitcoin holders in the market will start to sell their Bitcoin, and selling means they will have large amounts of funds (USDT/USDC) in hand again. These funds may enter the altcoin sector for speculation, pushing up the prices of some altcoins in that sector, leading to a rotation and rise in the altcoin sector. This process will also attract more on-exchange/off-exchange funds to join the speculation, thus forming the altcoin season.
However, for retail investors, most are late to the game. The above process actually has a strong retrospective nature, in other words, when you notice that Bitcoin's dominance is starting to decline, altcoins may have already started to rise. At this point, retail investors rushing in based on news hotspots often end up becoming bag holders because the rotation of altcoins can happen very quickly.
So, as a retail investor, how can one avoid the situation mentioned above as much as possible?
First, it focuses on the thought process:
The core idea here is to ensure that you can stay ahead of other retail investors by using methods you find reliable across multiple dimensions. The specific application of reliable methods may vary from person to person. For example, I have noticed that some partners in the group are skilled at forming their own indicators or even use different attribute groups they have joined to observe the emotions and activity levels within the group to assist in making entry or exit decisions. As shown in the image below.
Secondly, it focuses on strategy:
There are actually many factors that can be referenced in this aspect. Besides the BTC.D indicator and OTHERS indicator mentioned above, previous articles on the topic of the altcoin season have also discussed USDT.D, ETH/BTC exchange rate, TOTAL3, Altseason index, etc. Interested partners can search and revisit historical articles.
In addition to using various on-chain indicators for strategic assistance, macroeconomic factors are also crucial for our study and focus. For example, US Net Liquidity (the net liquidity of the US dollar, 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. As shown in the image below.
This is actually not difficult to understand; the liquidity in the crypto market mainly depends on the liquidity of the US dollar. When US dollar liquidity is on the rise, as more funds flow into riskier assets, altcoins often perform better. Conversely, when US dollar liquidity tightens, the market value of altcoins often declines.
Therefore, by tracking US dollar liquidity, we can further understand the liquidity status of the crypto market, thus judging the potential timing of the altcoin season. Of course, liquidity data indicators are something everyone can look at; what we need to understand is that such indicators also have a lagging effect and need to be considered in conjunction with policies (Federal Reserve monetary policy).
Generally speaking, the Federal Reserve's policy shifts 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 that starting in June, it would reduce the monthly cap on Treasury bond sales from $60 billion to $25 billion (Note: Slowing down the balance sheet reduction means decreasing the speed of capital recovery, which helps keep funds abundant in the market). This serves as a potential signal for a policy shift, theoretically, we may start to see some positive reflections in the market beginning in September this year. You can compare this with the performance of the stock market or crypto market since September.
Next, we need to pay close attention to the two upcoming FOMC meetings of the Federal Reserve, scheduled for November 6–7 and December 17–18. As shown in the image below. If the Federal Reserve announces continued interest rate cuts at that time, it would be a new clear signal, and we may welcome 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 policies, we will be better able to predict market trends, including judging the timing of the potential arrival of the altcoin season.
However, it is important to remind you that although 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 discussed in previous articles on altcoins, so let’s briefly summarize it here:
- There have been too many projects born in this cycle, so many that it can be described as massive, which will lead to liquidity being severely diluted. Even if we can welcome a new round of so-called altcoin season, only a portion of tokens may have the opportunity to break out, and we should recognize this broader new trend of altcoin seasons.
- This round of the bull market is mainly driven by ETFs. The inflow/outflow of ETF funds is more influenced by emotions, and this part of the funds can be classified as off-exchange funds, which will not directly (or entirely) flow into the altcoins of the crypto market.
- Many VC projects born in this cycle started with low circulation and high FDV. Project parties and institutions have been continuously dumping, and retail investors are continuously being trapped. This seems very difficult to pump (even if pumped, it would only be pumping while selling; the project parties have no vision at all). Instead of spending a lot of money to pump, project parties might as well start a new project to cut the retail investors again.
- The narrative of MemeCoins in this cycle has attracted nearly all retail investors' attention; many retail investors may prefer to play with lower market cap dogs for higher odds.
- As for some old altcoins from the previous cycle, because there are many trapped positions, it is harder to pump these coins. For the project parties to pump would mean giving an opportunity for trapped positions to break even, and the project parties would not be foolish enough to engage in trades that incur losses. This also serves as a reminder that one should not be obsessed with any altcoins; it is best to take profits (at least withdraw the principal) or continue to exchange for Bitcoin.
Just as described by partners in the group: last year, as long as it was a new track, you could make money if you entered early, but this year it is hellishly difficult. In the later stages of a bull market, it is often a crazy time; it seems like everyone can easily make money, but in the end, you will find that there are actually more people losing money.
We have reason to believe that in the next year or so, the crypto market will become more interesting. Before the end of this year, we may continue to face the BTC period (but the market is volatile, and in the next two weeks, there may be new significant fluctuations, so avoid leverage). In the first or second quarter of next year (2025), we may welcome the Altcoins period. If you are not disappointed or discouraged by this round of the bull market, please continue to focus on accumulating and holding your most optimistic positions while also considering planning your exit strategy for the bull market.
We will stop sharing here in this issue. More articles can be viewed on the Hua Li Hua Wai homepage. The above content is just personal viewpoints and analyses, intended for learning records and communication purposes, and does not constitute any investment advice.
