Anticipated Altcoin Season May Require More Patience, But What’s Meant to Come Will Come.

Author: Murphy, On-chain Data Analyst

On-chain Data Evaluation Model - Altcoin Season

One day, while I was in class, Xiao Chi @FC_0X0 sent me a WeChat message saying: "There’s a piece of data that shows the difference between the total inflow of stablecoins into exchanges and the dollar value of BTC withdrawn, which may have a direct relationship with the remaining potential purchasing power and the volatility of altcoins. Can we use this logic to look at the timing of the altcoin launch?"

Coincidentally, my presentation also mentioned data observations regarding the potential conditions for "capital overflow," which corresponded to the timing of certain large-cap altcoin launches. However, at that time, it was just a rough outline, and I vaguely thought of some previously overlooked areas…

After returning, I organized the data and, inspired by Xiao Chi's thoughts, re-conceived a set of visual indicators that can effectively judge the "altcoin season." Here are my thoughts:

Altcoin Season Condition 1: Capital Overflow Condition Assessment

(Figure 1)

In Figure 1, the green indicates whether the total scale of stablecoins flowing into exchanges within 30 days is greater than the dollar value of BTC withdrawn from exchanges. If so, it means that these funds not only have the potential to buy BTC but also to overflow into altcoins. The higher the green signal bar, the greater the theoretical overflow value, thus the more likely it is to meet the preconditions for the start of the altcoin season.

From the data, during the periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical overflow value is at its maximum, indicating a higher possibility of generating an "altcoin season" during these two periods. Additionally, there is a small segment between August and September, but in terms of scale and duration, it is not as significant as the above two periods, thus its influence is relatively weak.

Altcoin Season Condition 2: Capital Inflow of Mainstream Assets

(Figure 2)

Historically, BTC often leads the overall sentiment in the crypto market, followed by market confidence flowing into other large-cap mainstream coins, and finally tilting further towards ALT. The tool to visualize this capital rotation is the 30-day change in the realized market cap of BTC and ETH, as well as the total supply of stablecoins (as shown in Figure 2). When all three major mainstream assets show net capital inflow, it indicates that market sentiment is starting to become exuberant, and overall risk appetite is rising, which is one of the macro necessary conditions for the start of the altcoin season.

From the data, during the periods of 2023.10-2024.8 and 2024.10-2024.12, all three major mainstream assets simultaneously experienced net capital inflow, peaking in March and December 2024. This is also the point in the current cycle where market sentiment is the most FOMO.

Altcoin Season Condition 3: Positive Momentum in Altcoin Market Cap Dispersal

(Figure 3)

The data basis for judging the start of the altcoin season also requires a third condition, which is to isolate positive momentum within the dispersal of total altcoin market cap. We need to find periods where the 7D SMA of altcoins' total valuation is greater than its 30D SMA total valuation. Because, this can represent that the valuation of altcoins is amplifying in the short term, and liquidity flowing into altcoins is rapidly increasing.

In Figure 3, the red line represents the 7D average, and the blue line represents the 30D average; from the data, during the periods of 2023.10-2024.4 and 2024.11-2024.12, the red line crosses above the blue line, indicating that liquidity in the crypto space is starting to tilt towards altcoins, and the market cap of altcoins is entering a phase of positive momentum growth.

Summary

The above three conditions are considered from different angles: Condition 1 represents the possibility of capital overflow; Condition 2 represents overall sentiment and risk appetite; Condition 3 represents liquidity tilt. When all three are met, it is highly likely that the altcoin season is approaching.

Currently, Condition 2 is met, but Conditions 1 and 3 are not satisfied; thus, we can consider that the foundation for starting the altcoin season is present, but liquidity is still concentrated in mainstream assets (especially BTC), and there hasn’t been much overflow of funds into altcoins.

However, we can also see that the "negative overflow" in Condition 1 is slowly narrowing, which is a positive signal. Although friends may need to be patient for the anticipated altcoin season, what’s meant to come will come.

The content shared in this article is for communication and research purposes only and should not be considered investment advice.

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