Popular crypto analyst Moustache posted a tweet noting that the USDT dominance breaking below its 50-day moving average has historically signaled the start of an altcoin season. He pointed out this happened in both spring and fall of 2021, each time kickstarting strong rallies across altcoins with many seeing 20-50x gains.
Over the past week, we’ve already seen some altcoins like Solana, XRP, and Cardano surge over short time frames. This momentum seems to validate the start of a new altcoin season.
However, it’s important to note we are still early in the current crypto market cycle. The bull run that peaked in late 2021 was fueled by unprecedented retail and institutional interest, causing valuations across crypto assets to surge to unsustainable levels.
This time around, the macro environment is much less favorable with high inflation and interest rates, and talk of recession dominating headlines. While altcoins may outperform Bitcoin in the near-term, the upside is likely to be more muted compared to 2021.
While the macro environment may be dampening enthusiasm right now, the approval of a spot Bitcoin ETF by the SEC could prove to be a major catalyst. If regulators finally give the green light to a Bitcoin ETF in early 2024 as many analysts expect, it would open the floodgates of institutional money into the crypto space. With the backing of major financial players, Bitcoin could surge past its former highs and pull the rest of the crypto market up with it.
Most analysts believe the peak of the current bull market will align with the next Bitcoin halving in 2024 or 2025. This would put the total market cap on a trajectory to retest or exceed the $3 trillion level reached last year. However, getting to such lofty levels will take time and likely require a return to risk-on conditions across global markets.
In summary, Moustache makes a solid point about altcoin strength in the current moment. But claims of a new altcoin season should be taken with a grain of salt. While further upside is likely, blockbuster gains seen last cycle are improbable given the more cautious macro backdrop. The peak of the bull run is still at least 12-18 months away.
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