Metric analysis

Analysts say this key metric suggests an altcoin season is just around the corner

Bitcoin’s (BTC) 65% recovery from below $ 29,500 on July 20 to a high of $ 48,200 on August 14 took less than a month and helped bring new bullish momentum back to the market. crypto and traders dreading the prospect of another prolonged bear market.

Currently, the BTC rally is at a standstill near the $ 46,000 price point, and this phase of sideways trading gives altcoins the opportunity to advance. As the chart below shows, the total market cap of the altcoin market has increased by 80% since July 20. Meanwhile, Bitcoin’s dominance rate has been down 10% since July 30.

Bitcoin dominance over total altcoin market cap, 1 day chart. Source: TradingView

TradingView data shows Bitcoin’s dominance rate has been on the rise in recent weeks, but that trend fizzled out for Bitcoin on July 30 as a number of altcoin projects rallied due to a rebound. market-wide oversold, new partnerships and protocol updates.

DeFi and NFT projects hit records

Non-fungible token (NFT) and decentralized finance (DeFi) focused projects have been the biggest winners in altcoin over the past four weeks.

Three of the biggest winners last month are Axie Infinity Shards (AXS), Solana (SOL) and Terra (LUNA), all of whom saw their prices set new records on August 17th.

4 hour chart AXS / USDT vs SOL / USDT vs LUNA / USDT. Source: TradingView

As noted above, the AXS price jumped almost 400%, while LUNA and SOL rose 340% and 187%, respectively.

An interesting observation to note is that Solana and Terra began to see increased interest several days after the London hard fork was set up on the Ethereum network.

While the London hard fork introduced several beneficial changes to the Ethereum network, including a token-burn mechanism that has the potential to make Ether deflationary, the upgrade failed to address the cost issue. high transaction. This left the door open for competing layer one solutions like Solana and Terra to gain market share.

Related: Eth2 Staking Contract Ranks As Ether’s Largest Hodler With $ 21.5 Billion

Analysts announce start of altcoin season

The altcoin surge has led many traders to predict the dawn of a new altcoin season. According to “The Moon,” a pseudonymous Twitter analyst, altcoin seasons follow a boom in the price of BTC, especially when the price stagnates or declines.

Further evidence pointing to the start of an alternate season can be found in the growing number of altcoins hitting new all-time highs over the past two weeks. Double-digit daily earnings and price breaks from projects like Audius and memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) are making headlines, and Crypto Twitter is abuzz with chatter about the hottest altcoins in the world. to look at.

Despite this good performance, it is interesting to note that the Altcoin Season Index is actually at its lowest level in two years, as the tweet below highlights.

What this means, in the long term, is subject to interpretation, but a bullish idea is that the altcoin rally seen over the past two weeks is just a prelude to the real altcoin season, which has yet to begin. .

To this day, Bitcoin continues to be the primary market indicator that dictates the future direction of the crypto market as a whole, but data shows that phases of consolidation often give altcoins the opportunity to push higher.

If the price of Bitcoin drops back to $ 40,000 or less, most analysts would expect altcoin prices to move south as well. On the other hand, a rally above the $ 48,000 level should push altcoin prices higher.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move comes with risk, and you should do your own research before making a decision.