The rise in the Bitcoin price, which has been a source of positivity for many as of late, has generated similar expectations for altcoins – the public is already accustomed to the fact that all other cryptocurrencies are growing following BTC. But it seems that the time of such simple correlations has passed, and the very term ” altcoin season” may soon prove inaccurate.
Since the morning of August 18, cryptocurrency indices are all red, with almost every one of the Top 20 cryptocurrencies in decline. However, most market participants remain calm, seeing what is happening simply as a correction after a period of intense growth. One trend persists: Bitcoin continues to move upward, trying to overcome major resistance levels. And the demand for altcoins is still quite high.
Many are now arguing over whether BTC is back to growth or there is an even greater decline ahead? Really, though, it doesn’t matter at this point. Exactly a year ago, in August 2020, the first cryptocurrency was valued at $ 11,500. Then, over the course of the year, the price has grown fourfold. And how many more folds do you need?
Sure, Bitcoin has encountered quite strong resistance at the $ 48,000 level before trying to pass the $ 50,000 ceiling, and after two “attempts” in two days, it has rolled back to $ 45,000. But those are immediate BTC problems. From the point of view of strategic investors, however, the first cryptocurrency has shown strong growth. Now they expect that after overcoming resistance at $ 48K, we will see an increase to $ 50K, and then, perhaps, to $ 60K.
Usually, when the value of bitcoin goes up, the other cryptocurrencies follow suit. The signs of an upcoming “altcoin season” are there now, as well: since the end of July, the share of BTC in the crypto market has been decreasing. In recent weeks, it has gone down by more than 7%, to the current 43.4%. This indicates that, despite the rise in the price of the first cryptocurrency, altcoins in their aggregate absorb investors’ money even faster.
Indeed, the leaders in growth over the past couple of weeks have been Solana (SOL, up 65%, becoming the 10th largest cryptocurrency by capitalization), Ripple (XRP, up 64%), and Cardano (ADA, up 55%). Interestingly, on the verge of radical renewal, Ethereum, while remaining the second-largest cryptocurrency by market capitalization, has shown extreme volatility over the past week, eventually dropping in price from $ 3236 to $ 3040.
The analysts believe that, as BTC continues to grow, so will the altcoins, possibly reaching new record levels. Especially considering that the fear and greed index hasn’t gone below 70 points in over a week.
Altcoin Season Index also looks promising. The index is actually a fascinating tool. It analyzes the performance of all Top 50 coins over the previous 90 days. The more altcoins rise compared to BTC, the higher the season index. If 75% of all altcoins compete with bitcoin for more than three months, it means altcoin season is in full swing. If less than 25% of the Top 50 altcoins grow faster than Bitcoin, it indicates the Bitcoin season.
For example, let’s say there are 35 Top 50 coins that surpassed bitcoin over the course of 90 days. Altcoin Season index is then calculated as follows: 35/50 * 100 = 70. Stablecoins and asset-backed tokens are excluded from the calculations.
Judging strictly by the existing chart on a specialized site, now with a 12-point Index, we are clearly in a Bitcoin season. But the dynamics suggest otherwise – and August has already been designated as the “altcoin month” with a 76 Index. If the trend persists, we will see the full-scale altcoin season as soon as the fall.
If altcoins continue to rise, expect the DeFi industry to pick up steam again after a slow period – especially considering the successes of Solana, Terra, and other projects. If confidence returns to the market, we may see a new wave of interest in undervalued areas like NFT, Lending, and game project tokens.
However, there is one more important point that must be mentioned for the sake of transparency. The onset of the new altcoin season will not necessarily bring about a large influx of investments in the area. Firstly, a significant part of the fiat funds coming to the crypto market is now being absorbed by stablecoins and various asset-backed tokens. Secondly, we see the story of 2017-2018 repeat itself, when everyone and their granny created their own crypto coins hoping to get rich quickly off the cryptocurrency hype.
There is something similar happening now (albeit on a smaller scale). Take the recent (early August) story, when the New York Times journalist David Segal decided to show how strong and insane the excitement around such “hype coins” is. To do this, he created his own cryptocurrency called Idiot Coin and launched a marketing campaign to discourage people from investing in the token. But there were still more than 300 people willing to take the risk and make a quick buck, despite the direct instructions on the project’s website not to buy Idiot Coin.