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

Author: Socra, Golden Finance

As the US election draws to a close, Bitcoin's volatility has become more intense, and the price of the currency has hit a new high while the correction has become more obvious. Affected by this, altcoins are generally bleak, and even Meme coins that have repeatedly exploded with wealth effects have also been muted.

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 cycles, most VC coins have not experienced a surge after listing and have gone all the way to a deep valley with no bottom in sight. 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%, continuing to hit a new high in this round of bull market (2022-09 to date). The ratio of the total market valuation of altcoins to the market value of Bitcoin (OTHERS/BTC) after excluding the top ten crypto assets by market value has dropped to 0.16, which is only 16% of Bitcoin's market value, a new low since January 2021.

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

Research institution Matrixport also said 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.

For this situation of fire on one side and seawater on the other, some analysts believe that the cryptocurrency market has been "directionless" since April, and the volatility of the crypto market has increased due to the suspense of the US election, and the vulnerability of altcoins has been exposed.

In addition, there are several main reasons for the decline of altcoins 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 there is no capital inflow. The crypto industry itself is like a game, from which players get dopamine. 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 phenomenon, the additional trading volume is not enough to create sufficient buy-side liquidity. At present, the entire stablecoin market value is about 166 billion US dollars, but only 21% of stablecoins are used for trading, 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 rise in Bitcoin, overall, the strength of the altcoin cycle is gradually weakening.

And Eugene, a well-known trader, also said that the valuation of altcoins, which have fallen 80-90% in price 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 also belong to Memecoin. 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.

Navall, a well-known investor, also said: Most crypto projects will 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 and Kraken.

3. Can altcoins still usher in spring?

Altcoins have had many outbreaks in history, but the wealth-making effect of this round of bull market seems to be mostly reflected in Bitcoin and Meme coins. Whether altcoins will have a chance to rise again in the future, various institutions have given different judgments.

1. Bullish

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 Trump to win rather than Harris to win, but in fact, institutions are entering this field, adoption rates are rising, and ETF fund inflows are also ongoing. If Trump wins, I expect altcoins to rise more than Bitcoin. But in any case, I think both will go higher.

Galaxy Digital's head of research 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 data from the analysis company CryptoQuant, Korean traders are deploying high-quality altcoins, and altcoins are expected to strengthen in Q4. In addition, Korean trading platform trading volume data 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 large quantities, and a strong rise is expected in the fourth quarter.

Ali, an on-chain analyst, said 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 outperforming the market in the coming months. If macroeconomic pressures ease, it may lay the foundation for a bullish fourth quarter.

Michael van de Poppe, founder of MN Trading, said that the altcoin bull market is expected to start with the interest rate cut at the next Fed meeting.

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

2. Bearish

MNNC Group COO: Bitcoin and Ethereum have performed well and eliminated some altcoins, and industry consolidation will continue.

Willy Woo: The current cycle is a "Meme bubble casino", and it is recommended to trade altcoins instead of holding them. There is a deviation in the calculation of the market value of altcoins 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, and the dealer 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 altcoins to fly together, but this year seems to be a bit special. Bitcoin has repeatedly hit new highs, but most altcoins have continued to hit the bear market price level. The strength of the altcoin's pullback and the length of the trough are all testing investors' financial intelligence. However, the cryptocurrency market is inherently risky, and ordinary investors need to do their own DYOR.