A long wait: When will the harvest season for altcoins come?

As the US election draws to a close, Bitcoin's volatility has become more intense, with the price hitting new highs and then falling back more significantly. As a result, altcoins are generally bleak, and even Meme coins that have been creating a wealth effect have also lost steam.

Data shows that 95% of the popular tokens in 2017 have now faded out of the market, such as LTC, XMR and ETC. In this round of cycle, most VC coins have not experienced a surge after listing, but have gone all the way to a bottomless valley. So will the altcoin season that investors have been waiting for come?

1. Bitcoin season, altcoin winter

On November 3, TradingView data showed that Bitcoin's market share (BTC.D) rose to 60.52%, setting a new high in this bull market (2022-09 to present). Excluding the top ten crypto assets by market value, the ratio of the total market value of altcoins to the market value of Bitcoin (OTHERS/BTC) has dropped to 0.16, accounting for only 16% of Bitcoin's market value, a new low since January 2021.

According to Coinmarketcap data, the altcoin season index shows that in the past 90 days, only 25% or less of the top 100 cryptocurrencies have outperformed Bitcoin, and it is now the Bitcoin season.

Research institution Matrixport also stated that there are more than 20,000 cryptocurrencies on the market, but the market focus is still highly concentrated on Bitcoin, and the altcoin craze has not yet arrived.

Regarding this situation of fire on one side and sea water on the other, some analysts believe that the cryptocurrency market has been "directionless" since April. In addition, due to the excessive suspense of the US election, the volatility of the cryptocurrency market has increased, and the vulnerability of altcoins has been fully exposed.

In addition, there are several reasons why altcoins fell from almost the beginning of this year to the end of the year:

1. Insufficient liquidity

The founder of CryptoQuant said that the crypto industry is in crisis, and altcoins have performed poorly this year and no funds have flowed in. The crypto industry itself is like a game, and players get dopamine from it. However, there is a lack of builders exploring new technologies, which makes crypto projects unattractive.

In addition, he also said that although the continued growth in the supply of stablecoins is a good thing, the new trading volume is not enough to create sufficient buy-side liquidity. Currently, the entire stablecoin market value is about US$166 billion, but only 21% of them are used for transactions, far lower than 50% in 2021.

2. Cycle

Crypto analyst Willy Woo said that the current altcoin cycle is significantly different from the past. This is the third large-scale loss for retail investors since 2017, and the altcoin cycle is gradually weakening. The DeFi and NFT waves in 2020-21 and the current Meme coin craze have caused continued losses to retail investors. Although altcoins may still rebound after each Bitcoin rise, overall, the strength of the altcoin cycle is gradually weakening.

Well-known trader Eugene also said that the valuation of altcoins, which have fallen 80-90% since their launch, is approaching a reasonable level. Every unlocking is a bullish opportunity, allowing Diamond Hand participants to accumulate more tokens.

3. Lack of value accumulation

Zhu Su: VC coins lack value accumulation and are also Memecoins. The cryptocurrency market will produce countless assets with a market value between $50,000 and $500 million, while there are relatively few assets with a market value between $500 million and $50 billion.

Well-known investor Nawal also said: Most crypto projects fail because the founding team gets rich too early and does not recruit new members.

4. Regulatory crackdown

On November 2, the Blockchain Association disclosed data that since Gary Gensler became the chairman of the US SEC, the US crypto industry has spent more than $400 million to respond to the agency's enforcement actions. During this period, the US Securities and Exchange Commission filed lawsuits against some large crypto companies, including Coinbase, Kraken, etc.

3. Can altcoins still usher in a new era?

Altcoins have experienced many periods of explosive growth in history, but the wealth-making effect of this round of bull market seems to be mostly reflected in Bitcoin and Meme coins. Various institutions have given different judgments on whether altcoins will have a chance to rise again in the future.

1. Look more

Bitwise Chief Investment Officer: Regulatory clarity after the US election is more important for altcoins. Whether Trump or Harris wins, the regulatory environment for Bitcoin is improving. This is positive news for Bitcoin, especially for other cryptocurrencies.

In the short term, the crypto market prefers a Trump win over a Harris win, but in reality, institutions are entering the space, adoption is rising, and ETF inflows are ongoing. If Trump wins, I expect altcoins to rise more than Bitcoin. But regardless, I think both will go higher.

The head of research at Galaxy Digital also said that Trump’s victory is more beneficial to altcoins than Bitcoin, mainly because regulatory relaxation is more helpful to altcoins than Bitcoin.

According to the data from the analysis company CryptoQuant, Korean traders are investing in high-quality altcoins, and altcoins are expected to strengthen in Q4. In addition, the trading volume data of Korean trading platforms also shows that people are turning to altcoins with high beta values ​​(volatility greater than market volatility).

Markus Thielen, founder of 10x Research, also said in a recent report that fast-moving traders are seizing the opportunity to buy their favorite altcoins in droves, predicting a strong rally in the fourth quarter.

On-chain analyst Ali said that it is only a matter of time before the altcoin season arrives, and its market value may exceed $1 trillion.

Bitfinex: Altcoins may outperform Bitcoin in the coming months. If Bitcoin's dominance does reach a local top, we may see a period of altcoin outperformance in the coming months, which may lay the foundation for a bullish fourth quarter if macroeconomic pressures ease.

Michael van de Poppe, founder of MN Trading, said that he expects the altcoin bull run to start with the next Federal Reserve meeting when the Fed cuts interest rates.

CZ said that 2024 may be the "year of recovery" and historically the year after the "year of recovery" is a bull market.

2. Bearish

MNNC Group COO: The outstanding performance of Bitcoin and Ethereum will eliminate some altcoins, and industry consolidation will continue.

Willy Woo: The current cycle is a "Meme bubble casino" and it is recommended to trade altcoins rather than hold them. There is a bias in the calculation of altcoin market capitalization because this indicator only reflects the sum of successful projects, while failed projects are not included. Altcoins are an insider game, just like a casino, the banker will eventually win.

As for when altcoins will stop falling and stabilize, Benjamin Cowen, founder of Into The Cryptoverse, said that altcoin liquidation should end in December 2024 (at the latest in the second week of January 2025), which is a long journey.

summary

In most cases in the past, the rise of Bitcoin would drive the rise of altcoins, but this year the situation seems to be a little special. Bitcoin has repeatedly hit new highs, but most altcoins continue to hit the bear market price level. The strength of the altcoin's callback and the length of the trough are all testing the financial intelligence of investors. However, the cryptocurrency circle is inherently risky, and ordinary investors need to do their own DYOR.