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BTC surges, is there still an altcoin season in this round?

BTC surges, is there still an altcoin season in this round?

ChaincatcherChaincatcher2024/11/15 09:44
By:WOO

Bitcoin's market share hits a new high, capital flow may drive the explosion of altcoins, and DeFi and application projects may become the future focus.

Background: BTC Dominance at a Three-and-a-Half-Year High

On November 13, Bitcoin surged to $92,000, and the total market capitalization of cryptocurrencies reached $3.2 trillion, both breaking historical highs. This round has seen only Bitcoin and meme coins thriving, while altcoins have not experienced any significant gains.

The reasons for the lackluster performance of altcoins can be summarized as follows:

  • The market is not buying into the token economic models of new projects with low MC and high FDV, instead opting to invest in meme coins.
  • There have been no killer applications in this round.

The chart below shows Bitcoin's market dominance (BTC.D), which currently stands at 61%, a new high in three and a half years. Will BTC.D continue to rise? Can the aforementioned reasons for the downturn be resolved in this cycle? Is there still an altcoin season? Let's take a look with WOO X Research.

BTC surges, is there still an altcoin season in this round? image 0

Reference: Trading View

Logic Behind Altcoin Price Increase

We are currently in the early stages of a rate cut cycle, which means the U.S. is releasing more liquidity into the risk market. The flow of funds is directional; it starts with traditional real estate rising, and the funds overflow into the stock market. Once the stock market reaches a certain market cap, excess funds will flow into mainstream crypto assets (BTC/ETH/SOL). When mainstream crypto assets rise and meet market cap targets, funds will then flow into the smaller altcoin market, driving up their prices.

One can imagine the aforementioned asset classes as a series of basins, arranged from large to small. When enough water is poured in to fill the upper basins, it will naturally overflow into the smaller basins below. This flow of funds indicates that capital will follow the characteristics of market liquidity, moving from relatively low-risk, larger assets to higher-risk, smaller assets.

Therefore, the prerequisite for altcoin price increases is: Bitcoin must rise first, until it can no longer do so, prompting funds to move out of Bitcoin and into altcoins.

BTC surges, is there still an altcoin season in this round? image 1

Reference: @MustStopMurad

Current Market Cycle: The Eve of Altcoin Explosion

The chart below shows the total market capitalization of cryptocurrencies excluding Bitcoin and Ethereum (Total 3) since the beginning of this year. This chart also represents whether altcoins can explode. It can be observed that from April to September this year, the overall market cap of altcoins showed a significant downward trend, dropping from $750 billion to $550 billion. However, starting in September, the chart indicates a rebound in market cap, rising from $550 billion to the $600 billion to $650 billion range, breaking the downward trend and indicating that we have passed the lowest point for altcoins.

As mentioned earlier, BTC.D is currently close to 61%, a new high for this cycle and in three and a half years. Based on past experience, the start of an altcoin season is usually preceded by a rise in Bitcoin that drains altcoins, causing BTC.D to soar. When it rises to a certain level, BTC.D will then drop from its peak to the 50% to 55% range, allowing altcoins to catch up. We are currently in the cycle where BTC.D is soaring to its peak.

The overall cryptocurrency market cap is approximately $3.2 trillion. If the total market cap remains unchanged and BTC.D drops from 61% to 50%, it is expected that $320 billion will flow into the altcoin market, which also means Total 2 (excluding Bitcoin's market cap) will grow by 28%!

(Calculation formula: [3.2T*(61-50%)] / [3.2T*(1-61%)] = 28%)

BTC surges, is there still an altcoin season in this round? image 2

Future Outlook from a Financing Perspective: Focus on DeFi and Applications

We have just assessed the current market position based on various market cap data, while the future outlook needs to consider the current financing situation. Financing represents confidence in the crypto market for the next 6 to 12 months and is a leading indicator of the development of altcoins in this cycle.

In the past three months, financing amounts have revolved around infrastructure, with a total of $870 million raised. Infrastructure is a key track in the crypto market's financing landscape, as blockchain is still in its early development stage, making investors quite interested in securing positions in infrastructure. The second and third tracks to focus on are DeFi and others (usually referring to application DApps), with the former raising a total of $430 million and the latter $310 million, significantly outpacing other tracks.

The essence of financing is to invest in early-stage potential projects. While many criticize the poor price performance of altcoins, investment institutions are beginning to position themselves in early DeFi and application projects, expecting a new wave of explosion in 2025.

BTC surges, is there still an altcoin season in this round? image 3

Reference: Rootdata

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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