Is altcoin season upon us? Glassnode data tells you the answer

Here’s what on-chain analytics firm Glassnode’s “Altcoin Season Indicator” shows about whether altcoin season is currently underway.

Altseason indicator’s judgment of altcoin season

In its latest weekly report, Glassnode discussed the recent state of altcoin season in the cryptocurrency market. To check whether “copycat season” is on, the analytics firm designed the Copycat Season indicator.

This indicator, which determines whether investors are in risk-on mode based on capital rotation in the sector, checks two conditions.

First, the Altseason indicator looks at net capital flows across the industry’s three largest asset classes: Bitcoin (BTC), Ethereum (ETH), and stablecoins.

For the first two assets, net flows are measured using their “realized caps.” Realized Cap is a capitalization model that calculates the total valuation of any asset by assuming that the actual value of any token in circulation is the price it last moved at, rather than the current spot price.

The last transfer of any token is likely to be the last point at which it changes hands, so the price at the time of the transaction will be its current cost basis. The realized cap therefore summarizes the cost base of each holder in the industry.

In other words, the realized cap measures the actual amount of capital an investor has invested in an asset. Therefore, changes in the indicator will reflect the amount of capital flowing into or out of the asset.

For stablecoins, net flows can be judged based on just supply or market cap, since the value of the stablecoin remains pegged to $1 at every point, the amount of market cap and realized cap will be equal (both in addition to units) will be equal to supply).

For an active altcoin season, all three asset classes should have positive net flows. This is because capital typically enters the cryptocurrency space through these tokens, only to then move to altcoins as investor risk appetite rises.

Another condition that the altcoin season indicator checks is the momentum of the altcoin market cap itself. In particular, the indicator confirms whether the altcoin’s market capitalization is currently above its 30-day simple moving average (SMA).

Altseason indicator data in recent years | Source: Glassnode’s The Week Onchain - Week 8, 2024

The chart shows that the Altseason indicator first started flashing risk signals last October. However, this signal disappeared when the market cooled after the launch of the Bitcoin spot ETF.

However, after a 22-day pause this month, altcoin season indicators appear to indicate that altcoin season is back.