Altcoin
Altcoin Seasonal Index: What Lack of Momentum Means for Your Cryptocurrency Bets
- The seasonal altcoin index showed that investors need to take time.
- Participants will have to be more selective in their altcoin bets this cycle due to the flood of new tokens.
Bitcoin [BTC] at the time of writing this article it was trading at $61.5 thousand, just 3% above the low of $59.7 thousand. This range low was defended in the first half of May and the bulls led a rally to $72,000, but were unable to hold there.
The revisiting of this fundamental support meant that the consolidation phase was still in play and BTC was not yet ready for an uptrend. liquidity group below $60,000 could attract prices, thus forcing a deeper correction than most participants expect.
When the king of cryptocurrencies struggles to establish an uptrend after the halving, it stands to reason that most altcoins also suffer from bearish pressure. The capital inflow to support altcoin rallies is not yet there.
Investigating the seasonal altcoin index: the readings are not promising
Source: Blockchain Center
The seasonal altcoin index seeks to measure market sentiment and whether Bitcoin or the altcoin sector is doing better. If 75% of the top 50 altcoins perform better than BTC in a 90-day period, it is said to be altcoin season.
We are far from such a scenario coming into play. This is because the market lacks the capital inflows and speculative interests that fuel the altcoin season.
Traditionally, once Bitcoin makes a large upward move, it tends to consolidate. During this time, BTC holders choose to rotate some of their money into altcoins, betting on massive gains in assets much riskier than BTC based on fundamental analysis, tokenomics, and market sentiment.
Therefore, before an altseason can occur, we will need Bitcoin to make large gains, as was the case from October 2023 to January 2024.
The long-term implications of the dominance graph
Source: BTC.D on TradingView
The 2021 altcoin season officially extended from March to June 2021, according to the altcoin season index. However, studying the BTC.D chart above, we see that Bitcoin dominance began to trend downward in early 2021 and began to recover in the second half of the same year.
Therefore, a sharp decline in BTC.D is a key catalyst for altcoin seasons: it highlights the growth of the altcoin sector compared to Bitcoin.
Since March, the altcoin market has been in a bearish trend. While the trend of the timeframe higher has been positive, the current pullback has been brutal.
Light That of Bitcoin [BTC] Price forecast 2024-25
The dilution of the altcoin pool and the constant unlocking of tokens from existing projects has meant that demand has had to increase dramatically just to keep up with the expanding altcoin market.
In turn, this could see windfall gains concentrated across fewer alternatives in this cycle than in 2021 or 2017, and returns could be narrower than in previous cycles as participants are no longer early.