Altcoin Index May Have Surged Overnight, but Altcoin Season Is Not Here Yet

The altcoin season index grew by 10 points overnight, as Bitcoin (BTC) simultaneously stepped back from its record range. With BTC now down to $92,000, altcoins have automatically claimed a larger share of the market. Bitcoin’s dominance is back to 57.3% after a brief hike above 60%.

The altcoin season index is up to 59 points, growing from the 49 points it registered the night before. The index measures the relative performance of altcoins against Bitcoin (BTC). Notably, it does not immediately translate into demand or bullish perspectives for most assets.

The altcoin season index also covers the top 100 assets, which often includes outliers with highly positive short-term performance. Many meme tokens within the top 100 are boosting the performance score, including PNUT, WIF, SHIB, BONK, FLOKI, and the leading DOGE. The list also includes previous winners from various narratives, including L2, Web3 platforms, DeFi, and DEX

The top 100 altcoins include legacy mined assets, which may break out on their own and rebuild fandom. Names like Litcoin (LTC), Ethereum Classic (ETC), and Monero (XMR) belong in this category. Another growth driver may be the breakout of assets like Cardano (ADA), XPR, and Stellar (XLM)

Historically, altcoin season arrives after BTC’s rally ends and the flagship crypto establishes a stable range. However, in the case of a big BTC drawdown, altcoins suffer even deeper price cuts and take longer to recover.

A sliding BTC is no guarantee for the imminence of an altcoin season as smaller assets are still seen as unreliable

Short-term shift or real altcoin season?

Based on trading signals, the BTC versus altcoin season points to a risky short-term period. At the current stage, it is unknown if BTC is just taking a breather before extending its rally or if it’s just priming for an aggressive downward movement

Bitcoin buy index slid, while altcoin signal increased, suggesting an opportunity for a short altcoin market. | Source: Dune Analytics

The altcoin vs BTC signal is pointing to a potential short altcoin season. The current BTC buy signal is going down, while the altcoin signal bounced from its lows. The BTC signal is going down from its yearly top, crossing the ‘buy a house’ metric, while altcoins are still uncertain investments

In the past 12 months, altcoins signaled a change in direction, but they could not sustain the rally to replicate levels seen from previous cycles. This year, altcoins generally spent only a week in what looked like a promising expansion before crashing again

When will the altcoin season start?

Based on previous cycles, the altcoin season is expected between December 2024 and March 2025.

One potential driver for a new altcoin season would be a breakout of Ethereum (ETH) and its eco. ETH moved above $3,400, sparking hopes of outperforming BTC in the coming months. ETH has lagged generally, and its collection of L2s and other tokens are looking for a price recovery

The market cap of ETH and all Ethereum tokens is above $486B, of which ETH takes up $410B. Ethereum locks in above $65B in value across a total of 1,320 apps and protocols. An Ethereum rally will increase the value within DeFi and boost lending projects with increased collateral value. The rest of the market lags behind the valuation of meme tokens, as attention shifted to the new assets.

Ethereum-based tokens are still feeling the effects of previous token unlocks, VC selling, and a protracted bear market since 2022. There is no guarantee that their recovery will lead to new highs, or if funds will be redirected to revive those projects

Historically, even when altcoins gain, their rallies are short-lived and often end in rapid profit-taking. This could make investors more cautious about moving into these tokens, especially as BTC is more reliable and liquid, sustaining its rally for months

Also, altcoins often see accumulation at their low levels, with the intention of taking profits. So, these older altcoins and tokens may have holders from previous seasons waiting for a new rally to sell

Not every altcoin is equal in this cycle, with clear demarcations between working ecos. Each altcoin will have to work toward its own sources of liquidity, instead of relying on a flow of funds from BTC.

Bitcoin maximalism has been much stronger during this 2024 cycle, and investors are no longer actively seeking alternatives to BTC. Rather, they are just open to sources of exponential gains

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