BTC explodes. Is there another alt season in this round?

Author: WOO

On November 13, Bitcoin hit $92,000, and the total market value of cryptocurrencies reached $3.2 trillion, both breaking historical highs. This round is only the carnival of Bitcoin and memes, and altcoins have not kept up with the increase.

The reasons for the sluggish performance of altcoins are roughly the following two points:

• The market does not buy into the token economic model of low MC and high FDV of new projects, and instead invests in meme coins

• There are no killer applications in this round

The figure below shows the market share of Bitcoin BTC.D, which is currently as high as 61%, the highest in three and a half years. Will BTC.D continue to rise? Can the above reasons for the downturn be solved in this cycle? Is there still a cottage season? Let's take a look with WOO X Research.

Reference: Trading View

The logic of the rise of cottage coins

We are currently in the early stage of the interest rate cut cycle, which means that the United States has released more liquidity to the risk market, and the transmission route of funds is directional. From the very beginning, when traditional real estate prices rise, funds will overflow to the stock market. When the stock market reaches a certain market value, the excess funds will flow to mainstream crypto assets (BTC/ETH/SOL). When the mainstream crypto assets rise and meet the market value requirements, funds will flow into the cottage currency market with a smaller market value, thereby raising the price of cottage currencies.

You can imagine that the above asset categories are all basins from large to small. When enough water is poured in to fill the upper basins, the water will naturally overflow into the smaller basins below. Such a capital flow path shows that capital will follow the characteristics of market liquidity and flow from relatively low-risk, large-volume assets to high-risk, small-volume assets.

Therefore, the prerequisite for the rise of altcoins is that Bitcoin must rise first, until it can no longer rise, and capital is willing to leave Bitcoin and buy altcoins.

Reference: @MustStopMurad

Current market cycle: The eve of the altcoin outbreak

The following figure shows the changes in the total market value of the crypto market excluding Bitcoin and Ethereum since this year (Total 3), which also represents whether the altcoin can break out. It can be seen that during the period from April to September this year, the overall altcoin market value showed a sharp downward trend, from US$750 billion to US$550 billion, but since September, it can be seen on the chart that the market value has stopped falling and rebounded, rising from US$550 billion to the range of US$600 billion to US$650 billion, breaking the downward trend, and also indicating that we have passed the most depressed period of altcoins.

The BTC.D mentioned above is now close to 61%, the highest in this cycle and in the past three and a half years. According to past experience, the start of the altcoin season will first be the rise of Bitcoin sucking the blood of altcoins, so that BTC.D will soar. When it rises to a certain level, BTC.D will fall from the high point to the 50%~55% range, and the altcoins will make up for the rise. We are now in the cycle where BTC.D soars to the top.

The current overall cryptocurrency market value is about 3.2 trillion US dollars. If BTC.D drops from 61% to 50% under the premise of the total market value remaining unchanged, it is estimated that 320 billion US dollars of liquidity will be injected into the altcoin market, which also means that Total 2 (excluding Bitcoin market value) will grow by 28%!

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

Future prospects from the perspective of financing: focus on DeFi and applications

We have just judged the current market position from various market value data, and the future outlook needs to refer to the current financing situation. Financing represents confidence in the crypto market in the next 6-12 months, and is also a leading indicator of the development of altcoins in this cycle.

In the past three months, the amount of financing has been centered around infrastructure, with a total of $870 million in financing completed. Infrastructure is a key track in the financing landscape of the crypto market. Because blockchain is still in its early stages of development, investors are still interested in building infrastructure to take the lead. We can focus on the second and third tracks, which are DeFi and others (usually referring to application DApps). The former has a total financing amount of $430 million, and the latter is $310 million, which is far ahead of other tracks.

The essence of financing is to invest in early potential projects. While everyone is complaining about the sluggish price performance of altcoins, investment institutions are beginning to lay out early DeFi and application projects, and it is expected that a new round of outbreak will come in 2025.

Reference: Rootdata