Altcoins
What to Expect From Altcoins as ETH ETF Approval Nears
- A famous whale has sold its stock after a failed bet on Ethereum ecosystem tokens.
- The current cycle may not see an “alternative season” due to changes in market dynamics.
- The launch of the ETH spot ETF could cause a rally in altcoins due to their high correlation with Ethereum.
As the cryptocurrency market continues to consolidate on Wednesday, altcoins are showing mixed signals ahead of the launch of the ETH spot ETF. Many have predicted that altcoin season may not happen this cycle after the market doldrums. However, two key metrics suggest otherwise.
Investors Lose Ground on Altcoins After Recent Underperformance
Lookonchain data shows that a notable whale/institution sold off the majority of its altcoin holdings on Wednesday. The whale spent $75 million to purchase ETH and several other Ethereum-related tokens after the SEC approved ETH ETF issuers’ 19b-4 filings on May 23.
However, the cryptocurrency market has been in decline since the week of the ETH spot ETF approval. The SEC’s delay in approving issuers’ S-1 registration statements has raised concerns among investors who have become overly cautious about potential bullish bets.
The whale sold 3.13 million LDO ($5.77 million), 49,771 AAVE ($4.54 million), 269,177 UNI ($2.41 million), and 250,969 FXS ($708,000) at a loss. However, the whale made a profit of over $7.29 million on ETH, bringing its net profit to $2.87 million.
Lookonchain points out that the whale still holds approximately 3.33 million LDO ($5.83 million) and 31,191 AAVE ($2.8 million) despite suffering losses of $4.33 million due to the price drop.
The whale’s move mirrors the sentiments of some traders who had predicted that most altcoins had already reached their cycle highs during the cryptocurrency market rally from March to early April.
Many traders were expecting an “alt season” similar to the 2020/2021 bull cycle, when several altcoins (mostly Ethereum-based) rallied to new highs after Bitcoin tanked. However, the current cycle seems to be following a new trajectory due to several changes in the market, with the launch of the Bitcoin ETF being the most notable.
“In the last cycle, the game was simpler. Most of the activity was on $ETH and Ethereal DeFi Coins […] But now there are probably 300 decent projects. There is not enough liquidity for all of them. pumpnoted cryptocurrency trader @Route2Fi in an X post on Wednesday.
“Keep in mind that there are many more “utility” tokens on the market today than there were in 2021. Every week now, 3-5 “quality” coins are added to the market. The total market cap is increasing and everyone seems happy. But ask yourself who will buy all these tokens. Unless institutions or retailers come in en masse, it will just be an eternal PvP fight,” he added.
Could the alternate season narrative still work?
However, the “alternate season” narrative could still be in play for two main reasons.
First, while FUD has recently saturated the market, Santiment data has highlighted that most altcoins are in a buy zone, with their market cap to realized value (MVRV) ratios at lower levels.
The MVRV 30-day chart below features some altcoins, mostly Ethereum-based, with their ratio showing that addresses that purchased them in the last 30 days have average losses ranging from 5 to 18%. This is often interpreted as a sign of a potential bullish reversal.
Altcoin MVRV 30 Days
Second, investors are expecting spot ETH ETFs to launch before the end of July. Inflows into these ETFs could spark a rally in Ethereum, which is highly correlated with various altcoins in its ecosystem. The brief surge in several altcoins when the SEC approved issuers’ 19b-4 filings is evidence of this.
On the other hand, spot ETH ETFs could underperform analysts’ expectations, potentially creating a headwind for several Ethereum-related altcoins.