Analysts are predicting a surge in altcoin momentum, citing several key factors that could catalyze this upward trend, including anticipated lower interest rates and greater regulatory clarity. The phenomenon known as “altcoin season,” which began earlier in September, has seen 75% of the top 50 cryptocurrencies outperforming Bitcoin over the past three months, according to data from Blockchain Center, a crypto analytics firm. Notably, this analysis excludes stablecoins.
“Altcoin season” refers to a period when cryptocurrencies other than Bitcoin generate higher returns compared to the market leader. Experts believe that the ongoing transition from Bitcoin to altcoins will intensify, driven by flourishing corporate treasuries, reduced capital costs, and favorable regulatory developments. Shane Molidor, founder of the crypto investment bank and advisory firm Forgd, stated that the historical fluctuations in Bitcoin and altcoin markets indicate that investors will likely begin reallocating their capital toward altcoins.
These remarks come against the backdrop of Bitcoin’s dominance in the current cycle, characterized by record high prices and significant market interest. Nearly $10 billion has been funneled into Bitcoin exchange-traded funds so far this year, with financial giants such as BlackRock at the forefront. However, Bitcoin’s market dominance has dipped by almost 6% over the past six months, currently representing 58% of the overall $4 trillion cryptocurrency market.
In contrast, CoinMarketCap’s alt season index has surged to 71 from 44 in the previous month, while Coinglass’ tracker has reached a notable 80 out of 100, indicating a marked increase in altcoin momentum. This data appears to challenge the prevailing assumptions among hedge fund managers that Bitcoin would maintain its market supremacy.
Three primary drivers are underpinning this altcoin rally:
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The Federal Reserve: The anticipated decision by the US Federal Reserve to lower interest rates is seen as a significant bullish factor for altcoins. Investors widely expect a cut, as indicated by the CME FedWatch tool, which would inject additional liquidity into the financial system. Lower interest rates generally encourage investments in riskier assets such as cryptocurrencies. Molidor highlighted that a possible deeper cut than the predicted 0.25% could lead to a remarkable rally in crypto markets, given the element of surprise it may introduce.
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Treasury Companies: Institutions known as crypto treasury companies are playing a crucial role in this cycle, drawing in substantial amounts of institutional capital. By issuing debt to invest in cryptocurrencies, digital asset treasuries create a self-reinforcing cycle for price movements. Annabelle Huang, founder of Altius, pointed out that altcoin momentum is likely to persist for high-quality tokens with sustainable revenue, contingent on the structure and funding capabilities of these treasury firms.
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Regulatory Clarity: Last week marked a pivotal moment for the crypto sector, as Paul Atkins, Chairman of the US Securities and Exchange Commission (SEC), expressed support for the industry, asserting that “crypto’s time has come.” The SEC’s Project Crypto aims to clarify that most cryptocurrencies do not fall under the category of securities. The project also promises to establish a unified regulatory framework for various crypto trading, lending, and staking platforms. This initiative comes amid the SEC’s review of over 90 exchange-traded products, including applications for notable altcoins like Solana, XRP, and Litecoin.
For a true altcoin rally reminiscent of previous cycles, profit rotation and investor confidence are essential. Lukas Enzersdorfer-Konrad, deputy CEO of the crypto exchange Bitpanda, emphasized that a consolidation phase for Bitcoin often precedes an aggressive movement in altcoins as investors shift their focus toward higher-risk assets.
In market activity, Bitcoin saw a price increase of 1.1% over the last 24 hours, trading at $117,200, while Ethereum rose 0.5% to $4,540. The evolving dynamics are suggesting a notable shift within the cryptocurrency landscape as altcoins gain momentum and regulatory landscapes become clearer.
