Could Altcoin Season Be Starting? Here’s Why Traders Are Still Cautious

This article was first published on Deythere.

Many investors in the crypto industry have once again started mulling over whether altcoin season has finally landed. Glassnode on-chain data suggests that altcoins have begun outpacing Bitcoin, pushing its Altcoin Cycle Signal into territory traditionally associated with an altcoin-led market. However, derivatives data advice caution.

Bitcoin is still commanding a lot of trader attention, with open interest sitting at $21.11 billion compared to $16.36 billion for altcoins. This gap in interest indicates that capital is still concentrated in the biggest crypto despite growing optimism towards other digital alternatives.

The conflicting signals have investors asking if this is a genuine altcoin season or just another brief rotation while Bitcoin remains in control?

Glassnode’s Indicator Suggests Altcoin Season Is On

According to Glassnode’s Altcoin Cycle Signal, the conditions are currently in favour of altcoins over Bitcoin. This metric tracks the performance of the top 250 non-stablecoin cryptos and works out whether capital is shifting away from BTC. Glassnode’s latest reading is firmly entrenched in altcoin-season territory.

However, Glassnode and a few analysts have warned that the signal is being influenced by Bitcoin’s weakness rather than a genuine surge in altcoin strength. Recent declines in BTC have allowed many alternative cryptos to grab some relative performance gains, boosting the indicator.

That makes an important point. In order for a true altcoin season to happen, fresh money typically has to flow into altcoins, not simply Bitcoin losing ground.

Bitcoin Open Interest Is Still The Market’s Main Focus

While the data indicates improving conditions for altcoins, the derivatives markets show something else.

Bitcoin’s open interest is currently checking in at $21.11 billion, way higher than the $16.36 billion held across altcoins. Open interest is a good measure of where traders are putting their capital.

In past cycles, some of the strongest altcoin runs have occurred when altcoin open interest has surpassed Bitcoin’s. That threshold has not been reached.

Market Analyst Ted noted that altcoins may still have room to grow before the cycle hits exhaustion. He warned traders to start getting defensive once altcoin open interest overtakes Bitcoin’s,  a pattern that has in the past coincided with market tops. 

Grayscale Thinks Current Bitcoin Prices Are A Buying Opportunity

Grayscale Head of Research Zach Pandl believes current Bitcoin prices might be a long-term buying opportunity.

Pandl has highlighted three factors that could influence Bitcoin’s next big move: the Federal Reserve’s interest rates, progress on the CLARITY Act, and the financial position of Strategy. 

Grayscale has recently said that current Bitcoin prices appear undervalued based on a few on-chain metrics, although it probably hasn’t dropped to the extreme low levels seen at previous cycle lows.

Pandl also pointed out that Bitcoin has held support at $58,000, a sign that selling pressure may finally be fading after months of weakness.

What Needs To Happen For A Full On Altcoin Season?

A genuine altcoin season typically requires more than just a few tokens outperforming BTC.

For a market rotation to really take off, liquidity needs to start shifting away from Bitcoin and into Ethereum, Solana, all those Decentralized Finance projects and the smaller cap Cryptocurrencies. But right now, that shift just hasn’t happened.

Despite all the hype, Bitcoin keeps on pulling in the big inflows. That means there’s less capital floating around to fuel an altcoin rally. Many Analysts are therefore saying it is not an altcoin season but more of a Bitcoin-led market phase at the moment.

Another thing to be keeping an eye on is the Altcoin Season Index. Traditionally, when that number goes over 75,  then the market is in a full blown altcoin cycle.

But until that threshold is consistently being smashed, alongside more liquidity flowing into altcoins, investors are going to remain cautious about declaring the start of an altcoin season.

Conclusion

The latest data doesn’t outrightly translate to a full blown altcoin season for anyone hoping an altcoin season has finally arrived. On one hand, various signals like Glassnode’s Altcoin Cycle Signal are suggesting that altcoins are doing better than Bitcoin, with some investors in the market already talking about a rotation.

But on the other hand, Bitcoin’s massive $21.11 billion open interest is still way ahead of the altcoins’ $16.36 billion and that is a clear indicator of where traders are putting their money.

Unless the liquidity starts shifting away from Bitcoin and into the rest of the market, the whole scene seems to be stuck in a Bitcoin-led phase. Altcoins might still have some room to run, but for now at least, the evidence suggests the market is not quite yet in a classic altcoin season.

Glossary

Altcoin season: A period when altcoins outperform Bitcoin across the market

Open Interest (OI): The total value of all futures contracts that are currently active.

Bitcoin Dominance: How much of the overall market cap Bitcoin has.

CLARITY Act: The proposed US legislation that aims to create clearer crypto market regulations.

On-Chain Data: Blockchain-based metrics used to analyze network activity and investor behavior.

Frequently Asked Questions About Altcoin Season

What is an altcoin season?

An altcoin season is that point in the market when most altcoins are outperforming Bitcoin for an extended period of time.

Why is Bitcoin open interest important then?

Because it shows how much money is locked up in futures markets and that can give a good idea of how confident traders are.

What is Bitcoin open interest at the moment?

At $21.11 billion compared to the $16.36 billion locked up in the futures markets of all the altcoins.

What does Glassnode’s Altcoin Cycle Signal measure?

It keeps an eye on whether Bitcoin or all the other altcoins are doing better and it uses the top 250 altcoins to figure it out.

What level is needed to confirm a full altcoin season?

Many traders look for an Altcoin Season Index reading above 75, along with strong liquidity flowing into altcoins.

References

Glassnode 

AMBCrypto 

Bitget

KuCoin