Altcoins Require New Capital Flow to Trigger Upcoming Altseason
Altcoins have shown strength in 2024, but the altseason has not yet triggered a significant rally. CryptoQuant CEO Ki Young Ju explains that this delay is due to the current BTC price rally being driven by institutional participation and spot ETFs rather than retail traders.
Ju emphasizes that institutional investors and ETF buyers do not typically rotate assets from Bitcoin to altcoins. Their operations outside of crypto exchanges complicate fund transfers between Bitcoin and altcoins through OTC trades. While some investments may reach major altcoins via ETFs, smaller altcoins still depend on capital from crypto exchange users.
Altcoins Rely on Fresh Capital on Crypto Exchanges
For altcoins to achieve new all-time high market capitalizations, a substantial influx of fresh capital on exchanges is necessary. Currently, the altcoin market cap remains below its previous all-time high, indicating a lack of new liquidity from exchange users.
If retail investors return to Bitcoin, increased exchange user activity could potentially trigger an altcoin season. However, future Bitcoin growth is expected to stem from institutional investments, ETFs, and possible government involvement rather than retail traders.
Ju concludes that altcoins should develop independent strategies to attract new capital instead of relying solely on Bitcoin's momentum for growth.
Bitcoin Dominance Peaking, When Will Altseason Begin?
Analysts predict that Bitcoin's dominance in the crypto market is nearing its peak, suggesting that capital rotation into altcoins might begin soon. This shift could signal an upcoming altseason alongside Ethereum reaching an all-time high.
#Bitcoin reaching the green line means it has expanded to the extent where its market cap begins to rotate substantially into #altcoins.
It’s the signal that fires every 4 years prior to the macro decline in Bitcoin dominance known around here as “altseason”. pic.twitter.com/2FAdPxbMnK
— TechDev (@TechDev_52) November 27, 2024
The Total3 Index, which tracks the market capitalization of cryptocurrencies excluding Bitcoin and Ethereum, has rallied significantly over the past three weeks, reaching levels not seen in three years. This surge raises speculation about an impending altcoin season.
Last week, the Total3 Index achieved new cycle highs with a 23.2% increase, approaching its May 2021 high of $984 billion. According to a recent Bitfinex Alpha report, the altcoin market rally is attributed to ongoing regulatory developments.
Bitfinex analysts note that surpassing the April 2022 high for altcoins, considered the start of the bear market, signals a rotation of speculative capital and growing interest in altcoins as retail market participation increases.