Altcoin Season Is Here? Decoding Market Trends and Predictions

Do current market conditions, including spot Ethereum ETFs and Bitcoin volatility, point to an impending altcoin season? Read on.

In recent weeks, the cryptocurrency market has experienced critical changes, keeping everyone on edge. The crisis began when the defunct Mt. Gox exchange started repaying its creditors, causing a sharp drop in Bitcoin (BTC) and sparking widespread panic, fueling speculation that the bull run might be over.

Adding to the uncertainty, the German government launched a large-scale sell-off of its cryptocurrency holdings, sending BTC prices down further to around $53,700 by July 5.

Despite these setbacks, Bitcoin rallied to $58,000 as the market absorbed the shocks from both the Mt. Gox refunds and the German sell-off.

However, the real turning point came unexpectedly with a dramatic incident involving former US President Donald Trump. Known for his pro-crypto stance, Trump was I shoot in the right ear during a political rally.

After the attack, speculation about Trump’s potential political comeback and its positive implications for the cryptocurrency market acted as a catalyst.

As a result, the price of Bitcoin jumped from $58,000 to over $63,000 by July 14, briefly touching $65,000 on July 16 before settling at $64,937 at the time of writing.

BTC 1-week price chart | Source: TradingView

As if the market wasn’t volatile enough already, another major development is looming on the horizon: the approval of the Ethereum spot (ETH) ETFs.

The U.S. Securities and Exchange Commission (SEC) has granted preliminary approval to at least three of eight asset managers seeking to launch ETH spot ETFs. Final approval depends on their S-1 filings with regulators by the end of this week.

The approved asset managers, including big names like BlackRock, VanEck and Franklin Templeton, are expected to receive SEC approval on July 22, with trading in these new products set to begin the following day, July 23.

With these events sending ripples through the cryptocurrency market, the big question remains: what does this mean for altcoins? Are we on the verge of an altcoin season or will BTC and ETH continue to dominate?

We analyze the data and market sentiment to find out if altcoin season is really around the corner.

Altcoin dominance takes a hit

The altcoin market has recently gone through a period of strong volatility and to understand what is happening it is necessary to analyze some important data.

First let’s talk about Bitcoin dominance. Since November 2022, BTC’s dominance has strengthened. At that time, Bitcoin’s share of the total cryptocurrency market was around 40%. Then it steadily rose and reached over 56% in April 2024. Since then, it has hovered between 54% and 56%, settling at almost 55% as of July 16.

BTC Long-Term Dominance Chart | Source: TradingView

On the other hand, the dominance of altcoins (excluding the top 10 coins by market cap) is following a different pattern. It was high around 19.3% in January 2022, but then dropped to 8.22% by June 2023. There was a recovery to 13.4% in March 2024, but after Bitcoin reached its all-time high, altcoin dominance dropped back to around 10.27% by July 16.

Altcoin Long-Term Dominance Chart | Source: TradingView

Ethereum has been the primary driver behind every rise in altcoin dominance. When ETH prices rose, altcoin dominance followed, but other altcoins did not see the same level of interest or investment.

We can see this dynamic reflected in the Altcoin Season Index, which measures Altcoin performance versus Bitcoin. Typically, an Altcoin Season is considered active when more than 75% of the top 50 altcoins, excluding stablecoins, are outperforming BTC.

In October 2023, the cryptocurrency market turned bullish and altcoins gained strength. The index rose from 16 to a high of 84 in January 2024, suggesting that an altcoin season was starting.

Altcoin Season Index | Source: Blockchaincenter.net

However, the momentum of spot BTC ETFs pushed altcoins aside and the index fell back to 16 by June 2024. Recently, as BTC lost some momentum, the altcoin market recovered and the index rose to 46, marking the fastest increase since January.

But Mt. Gox redemptions and fears of sell-offs in Germany quickly sent the market crashing again, and the index fell to 33 on July 16.

Ethereum has played a major role in these movements. Data shows that every time Ethereum prices increased, the Altcoin Season Index also increased, indicating that Ethereum is a key booster for the entire altcoin market.

For a true altcoin season to begin, this index needs to consistently stay above 75 for several weeks or months. Until that happens, Bitcoin will likely continue to dominate, with Ethereum playing a key support role.

Is Altcoin Season Here?

Much of the speculation surrounding altcoins revolves around future events and historical patterns observed in the cryptocurrency market.

According to cryptocurrency analyst Wise Advice, the timing of the altcoin season often coincides with Bitcoin halving events. Historically, after each Bitcoin halving, which reduces the block reward for mining new bitcoins, the price of Bitcoin tends to reach new all-time highs (ATH) about 1-1.5 years later.

This surge in the price of Bitcoin is followed by a strong increase in Ethereum and other altcoins. For example, during the third halving bull run in November 2021, Bitcoin reached its ATH, and shortly after, Ethereum peaked at $4,800.

Similar patterns have been observed in previous halving events, where altcoins like Solana (SOL), Polka dot (POINT), and Avalanche (AVAILABLE) recorded their all-time highs following the Bitcoin rally.

The underlying mechanism of this pattern is the flow of money into the market. Initially, investors flock to Bitcoin, driving up its price. When Bitcoin investors make profits, they often reinvest in Ethereum and other altcoins. Due to the smaller market cap of these altcoins, even a relatively small influx of capital can cause substantial price increases.

This cycle of investment from Bitcoin to Ethereum and then to smaller altcoins leads to a temporary decline in Bitcoin’s dominance, giving way to altcoin rallies and eventually the altcoin season.

Meanwhile, Yann Allemann, co-founder of Glassnode, pointed to a recent market rotation in which riskier equity assets have outperformed more stable ones, a sign that could point to a similar shift in the cryptocurrency market.

Comparing this to a similar event in November 2020 suggests that we could see a massive rally in altcoins if this rotation continues. In 2020, such a shift led to a 400% increase in altcoin values ​​in the following four months.

While these predictions paint a promising picture, it is essential to approach them with caution. The market is inherently volatile, and while there are opportunities for profit, they carry risks that should not be overlooked.

Always do your research, stay informed, and avoid making decisions based solely on media hype.

Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.

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