BTC is continuing its uptrend, are we on the eve of altcoin season?

24-11-19 11:14

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Original Title: "WOO X Research: BTC Surges, Will There Be an Altseason in This Cycle?"

Original Source: WOO X Research

On November 13, Bitcoin surged to $92,000, reaching a total cryptocurrency market value of $3.2 trillion, both hitting historic highs. This round witnessed only Bitcoin's celebration alongside memes, while altcoins completely failed to keep up with the rally.

The underperformance of altcoins can be attributed to the following two main reasons:

· The market did not favor tokens with a low Market Cap (MC) and high Fully Diluted Valuation (FDV) in new projects' tokenomics, opting instead to invest in meme coins.

· There was no killer application in this cycle.

The following chart shows Bitcoin's dominance, BTC.D, currently at 61%, hitting a new high in three and a half years. Will BTC.D continue to rise? Can the above underperformance reasons be resolved in this cycle? Is there still an altseason? Let's explore with WOO X Research.

Reference: Trading View

Logic Behind Altcoin Surge

Currently, we are in the early phase of a rate cut cycle, which means the U.S. is injecting more liquidity into the risk markets, and the flow of funds is directional. Initially, funds flow from traditional real estate to the stock market. When the stock market reaches a certain market value, excess funds will flow into mainstream crypto assets (BTC/ETH/SOL). As the mainstream crypto assets rise and meet their market cap standards, funds will flow into the market of smaller-cap altcoins, leading to price hikes in altcoins.

One can imagine the above asset categories as a series of basins from large to small. When enough water is poured into the top basin and fills it up, the water will naturally overflow into the smaller basins below. This flow of funds indicates that funds will follow the liquidity characteristics of the market, moving from lower-risk, larger assets to higher-risk, smaller assets.

Therefore, the prerequisite for an altcoin surge is: Bitcoin must rise first until its rise stalls, and funds are willing to move out of Bitcoin to purchase altcoins.

Reference: @MustStopMurad

Current Market Cycle: Eve of the Altseason Eruption

The following chart displays the total market capitalization change (Total 3) of the cryptocurrency market excluding Bitcoin and Ether since the beginning of this year. This chart also represents whether altcoins can have a breakout. It can be seen that from April to September this year, the overall altcoin market cap showed a significant downward trend, dropping from $750 billion to $550 billion. However, starting from September, the market cap stopped falling and began to rise, increasing from $550 billion to the range of $600 billion to $650 billion, breaking the downtrend. This also indicates that we have passed the lowest point of the altcoin market.

As mentioned earlier, BTC.D is currently close to 61%, reaching a new high for this cycle and the past three and a half years. Based on past experience, the start of the altcoin season will first see Bitcoin rise, draining the altcoins, causing BTC.D to soar. When it rises to a certain level, BTC.D will then fall from its peak to the 50%–55% range, allowing altcoins to rise. We are currently in the period where BTC.D is soaring to its peak.

The current total cryptocurrency market cap is about $3.2 trillion. If, assuming the total market cap remains the same, BTC.D drops from 61% to 50%, an estimated $320 billion in liquidity is expected to flow into the altcoin market, indicating that Total 2 (excluding Bitcoin's market cap) will grow by 28%!

* Calculation Formula: [3.2T*(61-50%)] / [3.2T*(1-61%)] = 28%

Future Outlook from a Funding Perspective: Focus on DeFi and Applications

Having just assessed the current market position from various market cap data, the future outlook needs to consider the current funding situation. Funding represents confidence in the cryptocurrency market for the next 6–12 months and is a leading indicator of the altcoin development in this cycle.

Over the past three months, the funding amount has revolved around infrastructure, with a total of $870 million raised. Infrastructure is a key track in the cryptocurrency market funding landscape, as blockchain is still in its early stages of development. Therefore, investors are very interested in seizing the opportunity to build infrastructure. It is essential to focus on the second and third tracks, DeFi and others (usually referring to DApps). The former has a total funding of $4.3 billion, while the latter has $3.1 billion, leaving other tracks far behind.

The essence of funding is investing in early-stage potential projects. While many criticize the dismal performance of altcoin prices, investment institutions are beginning to position themselves in early-stage DeFi and application projects, expecting a new wave of growth by 2025.