Author: Socra, Jinse Finance
As the US election draws to a close, the volatility of Bitcoin has become increasingly intense, with the price hitting new highs while the pullbacks are also more pronounced. As a result, Altcoins are generally in a dismal state, with even Meme coins that have been constantly generating wealth effects also showing signs of slowing down.
Data shows that 95% of the popular tokens in 2017 have already faded from the market, such as LTC, XMR and ETC. And in this cycle, VC-backed coins have mostly not experienced a surge after being listed, but have instead headed straight towards an unseen bottom. So will the long-awaited Altcoin season still come?
I. Bitcoin's season, Altcoins' winter
On November 3, TradingView data showed that Bitcoin's market share (BTC.D) rose to 60.52%, setting a new high in this bull market (since 2022-09). Meanwhile, the total market capitalization of Altcoins (excluding the top 10 cryptocurrencies by market cap) relative to Bitcoin's market value (OTHERS/BTC) has dropped to 0.16, i.e. only 16% of Bitcoin's market value, a new low since January 2021.
According to Coinmarketcap data, the Altcoin season index shows that in the past 90 days, only 25% or less of the top 100 cryptocurrencies have outperformed Bitcoin, and this is currently Bitcoin's season.
Research firm Matrixport also said that there are now more than 20,000 cryptocurrencies in the market, but the market's focus is still highly concentrated on Bitcoin, and the Altcoin frenzy has not yet arrived.
Regarding this situation where one side is on fire and the other is in the water, some analysts believe that the cryptocurrency market has been "directionless" since April, and the uncertainty surrounding the US election has also increased the volatility of the crypto market, exposing the fragility of Altcoins.
In addition, Altcoins have mainly fallen from the beginning of the year to the end of the year for the following reasons:
1. Lack of liquidity
The founder of CryptoQuant said that the crypto industry is in crisis, and the poor performance of Altcoins this year is due to the lack of capital inflow. The crypto industry itself is like a game, where players get dopamine from it. However, there is now a lack of builders exploring new technologies, leading to a lack of attractiveness of crypto projects.
He also said that while the continued growth of stablecoin supply is a good phenomenon, the new trading volume is not enough to create sufficient buyer liquidity. Currently, the total stablecoin market cap is around $166 billion, but only 21% of the stablecoins are used for trading, much lower than 50% in 2021.
2. Cycle
Crypto analyst Willy Woo said the current Altcoin cycle is significantly different from the past, and this is the third major retail loss since 2017, with the Altcoin cycle gradually weakening. The DeFi and Non-Fungible Token waves in 2020-21 and the current Meme coin craze have all led to continued retail losses. Although Altcoins may still rebound after each Bitcoin rally, overall, the strength of the Altcoin cycle is gradually weakening.
And well-known trader Eugene also said that Altcoins that have fallen 80-90% in price since their launch are now approaching a reasonable valuation. Each unlocking is an opportunity for the bulls, allowing diamond-handed participants to accumulate more tokens.
3. Lack of value accumulation
Zhu Su: VC-backed coins lack value accumulation and are also Memecoins. The crypto market will produce countless assets with a market cap between $50,000 and $500 million, while assets with a market cap between $500 million and $50 billion will be relatively few.
Well-known investor Nawal also said: Most crypto projects will fail because the founding team gets rich too early and fails to recruit new members.
4. Regulatory crackdown
On November 2, the Blockchain Association disclosed that since Gary Gensler took over as chairman of the US SEC, the US crypto industry has spent more than $400 million to deal with the agency's enforcement actions, and the SEC has sued some major crypto companies, including Coinbase and Kraken, during this period.
III. Can Altcoins see a spring again?
Altcoins have had multiple explosive periods in history, but the wealth effect of this bull market seems to be more evident in Bitcoin and Meme coins. Whether Altcoins will have another chance to surge 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, and even more so for other cryptocurrencies.
In the short term, the crypto market is more inclined towards a Trump victory rather than a Harris victory, but in fact, institutions are entering this field, and adoption is on the rise, with ETF inflows also underway. If Trump wins, I expect Altcoins to outperform Bitcoin. But either way, I think both will rise.
The head of research at Galaxy Digital also said that a Trump victory is more favorable for Altcoins relative to Bitcoin, mainly because regulatory relaxation is more helpful for Altcoins than for Bitcoin.
CryptoQuant data shows that Korean traders are positioning in quality Altcoins, and Altcoins are expected to strengthen in Q4. In addition, data from Korean trading platforms also shows that people are shifting towards Altcoins with high beta values (volatility greater than market volatility).
Markus Thielen, founder of 10x Research, also said in a recent report that nimble traders are seizing the opportunity to buy their favorite Altcoins in bulk, and a strong rally is expected in the fourth quarter.
Chain analyst Ali said it's just a matter of time before the Altcoin season arrives, and their market cap may exceed $1 trillion.
Bitfinex: Altcoins may outperform Bitcoin in the coming months, and if Bitcoin's dominance has indeed reached a local top, we may see Altcoins outperforming the market for a period of time in the coming months, and if macroeconomic pressures ease, it may lay the foundation for a bullish Q4.
Michael van de Poppe, founder of MN Trading, said the Altcoin bull market is expected to start from the next Fed rate cut.
CZ said 2024 may be a "recovery year", and historically the year after a "recovery year" is a bull market.
2. Bearish
MNNC Group COO: The strong performance of Bitcoin and Ethereum has eliminated some Altcoins, and industry consolidation will continue.
Willy Woo: The current cycle is a "Meme bubble casino", and he advises trading Altcoins rather than holding them. The Altcoin market cap calculation is biased, as this metric only reflects the sum of successful projects, while failed projects are not counted. Altcoins are an insider game, like a casino, and the house will ultimately win.
As for when Altcoins will stop falling and stabilize, Into The Cryptoverse founder Benjamin Cowen said the Altcoin liquidation should end by December 2024 (at the latest in the second week of January 2025), which is a long journey.
Summary
In most cases, the rise of Bitcoin has led to the simultaneous rise of Altcoins, but this year the situation seems a bit special. Bitcoin has repeatedly hit new highs, but most Altcoins have continued to hit bear market price levels. The intensity of the Altcoin pullback and the length of the low point are all testing the financial acumen of investors. However, the crypto world is inherently high-risk, and ordinary investors need to do their own due diligence.
