Recent trends in the crypto world are hinting that altcoins could be gearing up for a serious rise. And, spoiler alert, this could happen sooner than you think! Coinbase is predicting that the market conditions are about to shift in favor of altcoins, with a potential “altcoin season” kicking off as we roll into September.
What Is an "Altcoin Season"?
Now, David Duong, the global head of research at Coinbase Institutional, shared his thoughts in a monthly outlook report on Thursday. According to him, there’s a pretty strong possibility that we’re heading into full-blown altcoin mania. In fact, he thinks the stage is set for altcoins to outperform Bitcoin (BTC) over the next few months.
I mean, when Coinbase, one of the biggest names in crypto, says something like that, you kind of have to pay attention, right?
So, what exactly is an "altcoin season"? Well, it’s when at least 75% of the top 50 altcoins by market cap beat Bitcoin’s performance over the past 90 days. And, in my humble opinion, it’s about time we see that shift. Over the years, we've seen Bitcoin dominating, but the tides might finally be turning.
Bitcoin Dominance Takes a Hit
Now, let’s talk numbers. Bitcoin’s market dominance has dipped from over 65% in May to around 59% by August. That’s a 10% drop, and it’s signaling that capital is slowly starting to move into altcoins. According to Duong, this is just the “early stages of capital rotation.” So, yeah, things are definitely heating up.
And here’s another reason why altcoins could be in for a big push: retail investors. There’s a ton of capital currently sitting idle in money market funds. With the Fed easing up on interest rates (which, by the way, is now 92% likely to happen in September), that could be the push needed for retail investors to get back into the game. And when they do, altcoins are probably going to get a big chunk of that capital.
Lower Interest Rates
But wait, there’s more. The recent CPI (Consumer Price Index) report showed inflation holding steady at 2.7%, which gives the Fed more room to lower rates. Lower interest rates often bring more attention to high-risk assets like altcoins. Sounds like a perfect storm brewing, right?
I can’t help but wonder how much further Bitcoin dominance will fall, especially since it’s already dropped to its lowest level since January. And, if history teaches us anything, when Bitcoin dominance takes a dive, altcoins tend to thrive. In fact, a crypto day trader named Ito Shimotsuma recently noted that this is the first time Bitcoin dominance has made a “bearish cross” since January 2021. Back then, altcoins surged for a solid four months. So, we could be looking at a similar pattern again.
Altcoin Season Indexes
Although altcoin season indexes have been climbing, they’re not quite at the 75% threshold yet, which is the traditional marker for an “official” altcoin season. However, they’ve made significant gains since early July, with the altcoin market cap growing by over 50%. That’s a solid indicator that the altcoin sector is gaining momentum.
In fact, some analysts suggest that institutional interest in Ethereum (ETH) is driving this shift. Duong points out that this growing interest in Ethereum, alongside the rise in altcoin market cap, is one of the key reasons why we could be seeing a potential altcoin season very soon.
The Conditions for an Altcoin Season to Take Off
Of course, for an altcoin season to truly take off, three things need to align: a favorable macroeconomic environment, Bitcoin’s dominance must continue to decline, and we need a strong new narrative. According to Joanna Liang, founding partner of Jsquare (a venture capital firm in Singapore), past altcoin seasons have been driven by clear catalysts, like ICOs in 2017–2018 and DeFi/NFTs in 2021–2022. But this time around, the market is still waiting for that big new catalyst to spark a true altcoin rally.
Is an Altcoin Season Coming?
So, will we see an altcoin season soon? I think the signs are all pointing in that direction. Whether it’s Ethereum’s institutional adoption or the shift in Bitcoin dominance, all the pieces seem to be falling into place.
Anastasiia G
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