The cryptocurrency market suggests that the season of altcoins is coming. Unfortunately, we are not there yet.

As with most things in this industry, there is almost no formal definition that everyone agrees on.

Does BTC Bear Market start like TradFi when it pulls back more than 20% from a local top? Obviously not.

Is the protocol ‘Decentralization’ because it has a governance token? If that’s the case, the project party wouldn’t feel that everything is ‘difficult’.

Since the beginning of this month, the total market capitalization of Cryptocurrency has pumped nearly 20%, rising to over 3.6 trillion US dollars, reaching 23.5 trillion US dollars. Alts account for about 40% of the total market capitalization, with the rest coming from BTC.

So, what is the AltCoin season after all?

An occasionally cited metric suggests that the Altcoin season begins when three-quarters of the top 50 Tokens outperform BTC in the past 90 days.

This time, only 34% of the top 50 Tokens outperformed BTC. Although there was a very brief period at the beginning of the year that met these criteria, there was no AltCoin season.

As faithful readers of Empire know, I have a different way of tracking the AltCoin season, which extends far beyond the top 50. But even so, we are still far apart.

When the blue line (AltCoin) is higher than the orange line (BTC), the AltCoin season may occur

My approach is as follows: when the market capitalization of the entire cryptocurrency market (excluding the top 10) starts to rise from the bottom of the cycle, it may indicate the beginning of the Altcoin season.

Only when the rise speed of the broader Cryptocurrency market exceeds that of BTC for at least 90 days can the Altcoin season be confirmed.

This is not a perfect model, but it does stand up during backtesting. It is also very generous to alts: in many cases, the market capitalization rise only reflects the speed of token unlocking and increasing circulation supply, not price appreciation.

According to these rules, Crypto Assets has gone through three different AltCoin seasons in the past eight years, as shown in the green shaded area in the following figure.

From July 2016 to January 2018, Litecoin, Monero, Ethereum Classic, Dash, and the original Prediction Market Token Augur were among the top ten in the 18-month period.

From December 2018 to July 2019, Bitcoin Cash, EOS, Stellar, and BTC SV approached the status of Blue-Chip Stocks within six and a half months.

From May 2020 to November 2021, Polkadot and Chainlink have been at the top of the list for nearly 18 months.

The current market cycle began on November 21, 2022, when the total market capitalization of Crypto Assets dropped to $727.58 billion after the FTX crash, the lowest point since December 2020.

Bitcoin’s market capitalization has risen nearly fourfold from the bottom of the cycle, rising from 313.4 billion to 1.27 trillion (from $15,500 to $64,400).

At the same time, AltCoin’s rise during the same period was less than 2.8 times, which means we are still a whole order of magnitude away from the AltCoin season.

From April to the beginning of this month, this gap has widened dramatically, while the altcoin season is the furthest it has been in the entire cycle. When BTC peaked in March, this gap was at its smallest.

All of this means that whatever pump AltCoin is experiencing right now is actually just a strong Rebound. AltCoin prices have undergone a significant pullback after BTC recently reached a historical high, and now they are basically back to the level of the end of July.

Those in the Bear Market will say that the Altcoin season won’t come until the Bull Market is over.

However, considering how much further AltCoin has to go, longs may think that we are about to usher in the strongest AltCoin season ever.

Data

BTC has pumped 1% in the past day and is expected to break the $64,500 mark again, while in the past seven days, the price has rebounded at least three times.

ETH remained flat after reaching the resistance level at $2,640.

In the past week, only two of the top 100 tokens have fallen: KAS has fallen 6% and XMR has fallen 5%.

Etherum once again fell into a deflation state overnight, but it didn’t last long.

Base TVL set a new record of over 20 billion US dollars for the first time, with an increase of over 6 billion US dollars in the past 18 days.

Take a deep breath

The volatility this week is acceptable, but this situation may not last for a long time.

You see, there will be a $5.8 billion Options expiring tomorrow, which is one of the largest Options expirations so far this year.

20% of BTCOptions are in-the-money, which means larger expiration dates “may exacerbate market fluctuation or activity as traders Close Position or roll over positions, which could also impact prices,” said Deribit CEO Luke Strijers.

Strijers continued, “Overall, the Options market has performed well this year, with the volume rising month by month. Despite many new competitors, our market share has not decreased significantly, which is a healthy sign because the market is rising—exchanges will not compete for the same customers. Instead, we are jointly expanding market share and attracting new customers.”

Given that this situation is about to happen, let’s look at the bigger picture and explore the broader market, as David has provided us with a fantastic Snapshot of AltCoins. The K33 report earlier this week showed that CME traders are ‘cautiously optimistic’.

The analyst wrote: “After the FOMC announced a rate cut, CME’s BTC and ETH premiums rose to 9%. After the FOMC announced a rate cut, CME’s unclosed position contracts reached a peak of 161,040 BTC last Thursday, and active market participants increased their exposure by 6,500 BTC. Since then, unclosed position contracts have fallen to 152,000 BTC”.

However, Perptual Futures traders are not so optimistic, some bearish sentiment still exists, which may ‘lay the groundwork for a large-scale short squeeze’.

Source: Deribit

Analysts Vetle Lunde and David Zimmerman said: ‘Since the first related rebound of FOMC, perpetual options traders have become more conservative, and the discount of perpetual options has continued to expand in the stable PA situation. This is consistent with the increase in unclosed position contracts, which are still hovering near the high point of the year.’

For those who follow the Fear and Greed Index, the index is currently in a neutral state after showing some fear last week.

The macro impact will not disappear quickly. K33 pointed out: ‘We also expect economic indicators to continue to affect BTCPA. Important monthly labor market statistics will be released next week, and the bank holiday season will begin in the eastern hemisphere, which may exacerbate the follow-up of US-related data.’

We are getting closer to the November elections and the fourth quarter, which is still a potentially positive period for crypto assets.

For longs, it’s almost time to take action.

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