With the rise of BTC this week, the price of BTC has reached as high as around $73,600, just under $200 away from the all-time high. As of the time of writing, BTC's dominance (BTC.D) has reached 60%, which is the first time it has reached 60% in nearly three years. As shown in the figure below.
In our previous article, we mentioned that based on historical experience (data), when BTC accounts for 65-70% of the market, it usually signals the arrival of an Altcoin season, when some Altcoins will take turns to surge. Although historical experience does not represent the present, and there are many changes in this cycle that are different from previous cycles, such as this bull market being driven mainly by ETFs, and the massive number of new projects in this cycle diluting liquidity, the arrival of an Altcoin season is still something to look forward to.
A few days ago, a partner in the group shared an OTHERS data indicator, as shown in the figure below.
From the indicator shared in the figure above, this is a relatively typical head and shoulders bottom formation, and it seems to be currently forming the right shoulder, with a potential breakout point between (2) and (3), and once broken, it is likely to see a pullback to (4) position, and then continue to rise to (5) position.
Currently, the total market cap of Altcoins is still fluctuating, and overall, the Altcoin season of this bull market seems to be in a relatively lagging state. So when will the next Altcoin season arrive?
The BTC.D indicator we mentioned in the previous article is considered by many as an important indicator to measure when the Altcoin season will arrive. The underlying logic is relatively simple - when the price of BTC is pushed up, some BTC profit-takers will start to sell BTC, and after the sell-off, they will hold a large amount of funds (USDT/USDC) again, which may flow into the Altcoin sector for speculation, causing the prices of some Altcoins to be pushed up again, and the Altcoin sector to start rotating upwards, and this process will also attract more on-chain/off-chain funds to join the speculation, forming an Altcoin season.
However, for retail investors, most of them are late to the game. The above process actually has a strong retrospective nature, in other words, when you find that BTC's dominance starts to decline, Altcoins have often already started to rise, and at this time, retail investors will chase the news hotspots and enter the market, most of them will become bag holders, because the rotation of the Altcoin sector may happen very quickly.
So, as a retail investor, how can we avoid this situation as much as possible?
First, focus on the mindset:
The core idea here is to ensure that you can stay ahead of other retail investors through more reliable methods that you believe in. As for the specific application of reliable methods, this may require different people to have different views. For example, I found that some partners in the group are also good at forming their own indicators, and even through joining some different attribute groups, they can use the observation of the group's sentiment and activity to assist their entry and exit judgments. As shown in the figure below.
Secondly, focus on the strategy:
In this aspect, there are actually quite a few factors that can be referenced, in addition to the BTC.D indicator and the OTHERS indicator we mentioned above, the previous articles of "Talk Less, Do More" on the Altcoin season topic also mentioned USDT.D, ETH/BTC exchange rate, TOTAL3, Altseason index and so on. Interested partners can search and review the historical articles.
In addition to using various on-chain indicators for strategic assistance, macroeconomic factors are also what we need to focus on researching and paying attention to, such as US Net Liquidity (the indicator is calculated by analyzing the Federal Reserve's balance sheet and other macroeconomic factors).
If we combine the TOTAL3-USDT-USDC data indicator and the US Net Liquidity indicator, we will find that the changes in US dollar net liquidity can serve as a reliable reference indicator or signal for the Altcoin season. As shown in the figure below.
This is actually not difficult to understand, the liquidity of the crypto market mainly depends on the liquidity of the US dollar, when the US dollar liquidity is on an upward trend, with more funds flowing into riskier assets, Altcoins often also perform quite well. Conversely, when US dollar liquidity contracts, the market cap of Altcoins often declines.
Therefore, by tracking US dollar liquidity, we can further understand the liquidity situation of the crypto market, and thus judge the potential timing of the Altcoin season. Of course, everyone looks at liquidity data indicators, what we need to understand is that such indicators also have a lag, and we also need to consider policy (Federal Reserve monetary policy) at the same time.
Generally speaking, the policy changes of the Federal Reserve need about 4-8 months to be fully reflected in the market. For example, in May this year, the Federal Reserve adjusted its balance sheet reduction plan, announcing that from June, the monthly cap on US debt reduction would be lowered from $60 billion to $25 billion (note: slowing down balance sheet reduction means reducing the speed of fund withdrawal, which helps maintain ample market liquidity), theoretically, we may see some more positive reflections in the market starting from September this year. You can compare the performance of the stock market or the crypto market since September to see this.
Going forward, the key things we need to focus on are the two FOMC meetings of the Federal Reserve, scheduled for November 6-7 and December 17-18, respectively. As shown in the figure below. If the Federal Reserve announces further rate cuts at that time, it will be a new clear signal, and we may see greater market opportunities in the near future.
In summary, by focusing on some on-chain indicators, US dollar liquidity, and the Federal Reserve's monetary policy, it will help us to judge the market trend in advance, including the potential timing of the Altcoin season.
However, it still needs to be additionally reminded that although we mentioned that the arrival of the Altcoin season is something to look forward to, this does not mean that all Altcoins will have the opportunity to surge going forward. The main reason for this has also been mentioned in the previous "Talk Less, Do More" articles on Altcoins, let's briefly review it again:
- Too many projects have been created in this cycle, which can even be described as massive, and this will lead to a serious dilution of liquidity. Even if we can welcome a new round of the so-called Altcoin season, it is only a part of the tokens that may have the opportunity to break through, we should recognize this new trend of a more widespread Altcoin season.
- This bull market is mainly driven by ETFs, the inflow and outflow of ETF funds is more of an emotional impact, and this part of the funds can be considered as off-chain funds, which will not directly (or entirely) flow into the Altcoins in the crypto market.
- Many VC projects in this cycle have low circulation and high FDV from the beginning, the project parties and institutions have been cashing out and cutting the grass, retail investors are constantly being trapped, and it seems difficult to pump the price (even if pumped, it will only be a case of pumping and dumping, the project parties have no vision at all), it is better for the project parties to open a new project to cut the grass again than to spend a lot of money to pump the price.
- The narrative of MEME coins in this cycle has attracted the attention of almost all retail investors, and many retail investors may be more willing to gamble on lower market cap, higher odds on-chain MEME coins.
- As for some old coins from the previous cycle, due to the large number of trapped positions, it is more difficult to pump the price, because if the project party tries to pump the price, it means giving the opportunity to those with trapped positions to get out, and the project party will not be so foolish to do a losing business. This also serves as a reminder to everyone not to be obsessed with any Altcoins, it is best to cash out the profits (at least withdraw the principal) or continue to exchange them for BTC.
Just as the partners in the group described: last year as long as it was a new track, you could make money by getting in early, but this year is hell-level difficulty. In the late bull market, it is often a crazy time, and it may seem that everyone can easily make money, but in the end you will find that there will be more people losing money.
We have reason to believe that over the next year or so, the crypto market will become more interesting, and before the end of this year, we may continue to face the BTC season (but the market is volatile, and there may be significant new volatility in the next two weeks, be careful to avoid leverage). In the first or second quarter of next year (2025), we may welcome the Altcoin season. If you have not been disappointed or discouraged by this bull market, then please continue to focus on accumulating and holding the positions you are most confident in, and also consider starting to plan your bull market exit strategy.
That's all we have to share in this issue, you can check more articles on the homepage of Hua Li Hua Wai. The above content is just my personal perspective and analysis, and is only for learning and exchange, and does not constitute any investment advice.
