The late Q3 altcoin season has peaked, but there is a decent chance that another wave could be possible in the mid-term.
According to on-chain analyst Joao Wedson, the Altcoin Season Index has hit an overheated zone, and Bitcoin may strengthen from now going forward.
The altcoin season we experienced in September is already over! Now is no longer an ideal time for altcoins, as the Altcoin Season Index has peaked.
He added that ASI indicator peaks tend to coincide with liquidity rotation back to Bitcoin and stablecoins.
According to him, this is why several altcoins have seen much sharper declines compared to Bitcoin.
Since 2nd October, BTC’s price has dropped by 8% from $87K. It briefly tagged $80K, before rebounding on the charts. Over the same period, Ethereum [ETH] shed 14% of its value and slipped below $2.5K from $2.8K.
XRP crashed by 20% while Solana [SOL] lost 15% of its value. In fact, most of the altcoins saw double and triple gains in Q3. So, the intense profit-taking during slight BTC corrections was not surprising.
Interestingly, CryptoQuant data revealed that the level of profit-taking in the altcoins segment hit a 1-year high. This was illustrated by the Altcoins Exchange Inflow, with the same hitting record levels seen in last October’s market crash.
However, it was not all that gloomy for bulls positioning for potential opportunities in the sector.
Are other waves of altcoin rallies likely?
As mentioned by Wedson, such an altcoin sell-off triggers capital rotation to Bitcoin and stablecoins. Put differently, parked stablecoins would increase as traders wait for better conditions to jump back in.
As the most dominant stablecoin in the crypto market, Tether’s USDT market share can help track both the said liquidity rotation and inflection points for altcoin rallies.
There has been a small uptick in USDT market dominance this week (green candle), suggesting that stablecoins were parked as profit-taking intensified. As expected, the altcoin market cooled off a bit, as shown in the chart.
However, the broader trend in USDT dominance decline suggested that the altcoin season rallies may not be over, just paused or in a cool-off.
During the early innings of the 2023 bull run, USDT dominance dropped from 8% to 6%. It declined to 3.7% in 2024. During the downtrend, the altcoin market cap, excluding BTC and ETH, increased from $400B to over $1T.
As such, a surge in USDT dominance could delay another altcoin rally. However if USDT dominance follows the 2023 pattern, the altcoin market could be set for a major rally next year.
I think the crypto fiesta can continue this weekend because smaller altcoins are already showing strength while Bitcoin consolidates.
Final Summary
- Q3’s altcoin season peaked as profit-taking hit a 12-month high.
- BTC price consolidation could trigger a short-term altcoin market rebound.
