The cryptocurrency market is fast-paced and ever-evolving. From Johannesburg, Amahle Nkosi has been eyeing the telltale signs that could lead us into a new alt-coin season. An altcoin season is a crypto-lover’s dream. During this period, altcoins—cryptocurrencies other than Bitcoin—experience massive gains, with many greatly outpacing Bitcoin’s return. There are a number of signs that indicate this season is near. In this story, we’ll take a closer look at these indicators and give you a running guide to the most interesting things to look for.

One of the primary signals of an impending altcoin season is the increased dominance of altcoins in the cryptocurrency market. This means that altcoins, collectively, continue to take a larger slice of the overall pie. An altcoin season is usually characterized by one key metric. It is pretty simple. It happens when 75% of the top 100 coins, and at times even the top 50 coins, outperform Bitcoin over a 90-day period. This outperformance across the board is both a clear sign that investor sentiments and capital allocation have shifted towards altcoins.

The second is the existence of “FOMO” — Fear Of Missing Out — mentality. This tends to look like high 24-hour trade volume on large cap altcoins, showing bullish longs entering with significant buying pressure creating upward price momentum. Of course, bullish market sentiment fuels the excitement. Then, when they see that altcoins have the potential for massive returns too, that creates more excitement and interest about investing in them. It is common for large-cap altcoins to outperform Bitcoin in both directions by large margins over chunks of time. This further cements the mindset that altcoins have more profit potential in these periods.

Ethereum's Performance: A Key Indicator

Ethereum’s performance is usually seen as a bellwether for the broader crypto market, and especially for altcoin seasons. Historically, altcoin cycles have often been started by Ethereum’s outperformance against Bitcoin. Amahle agrees that Ethereum has made some positive moves in the recent past. As Bitcoin skyrocketed 113% in early 2024, Ether is up some 53%. Following the U.S. election results, Ether Telegram emoji sent one of its largest candles shooting up. It blasted off at over 39%, beating Bitcoin’s own 35% increase.

Ethereum’s market share had gone to naught in the face of a general market retreat. The recent price spike has contributed to an impressive recovery for its stock. In the process, they rose back over 7.5% on April 23 after rebounding off of a unique support level. This recovery is a testament to strength and renews investor confidence in Ethereum. This momentum tends to have a spillover effect, helping boost the rest of the altcoin market. Finally, Amahle stresses that this performance is the most important to track as a leading indicator.

Bitcoin's dominance is another crucial factor. A decrease in Bitcoin’s dominance indicates that altcoins are making headway. Over the last few months, Bitcoin’s dominance has lost ground. It ranged from a high of 61.7% in October to 57.4% in November and then plummeted to 56.5% in December. This slow and steady decline is a sign that altcoins are gaining momentum and likely getting ready for a big break out.

The Altcoin Season Index: A Quantitative Measure

To get a deeper sense of whether an altcoin season is likely, it helps to look at the Altcoin Season Index. This index measures the performance of the 100 largest altcoins. It pits them against Bitcoin over a 90-day window. This provides a useful quantitative yardstick to know if the market is really in an altcoin season or not.

The Altcoin Season Index works by measuring the performance of the top 100 coins listed on CoinMarketCap, excluding stablecoins and wrapped tokens. It looks at the rolling 90-day price performance of each compared to Bitcoin. If over 75% of these altcoins outperform Bitcoin over this period, the Index signals that the market is in an altcoin season. In addition, a value greater than 75 on the Index is typically regarded as a robust bullish signal for major altcoin outperformance.

The Index provides an easy-to-understand, numerical overview of positive and negative market trends. Simply put, it measures the degree to which altcoins are beating Bitcoin’s performance. This allows investors and traders to better understand the collective sentiment and potential opportunities within the altcoin market. It’s a great resource to help guide smart data-driven investment decisions that are attuned to market needs.

Key Levels to Watch for ETH/BTC

Given Ethereum's pivotal role in potentially kicking off an altcoin season, it's essential to monitor key levels for the ETH/BTC trading pair. These levels are worth watching for clues about Ethereum’s strength versus Bitcoin and the direction of the broader market. Amahle marks a few key support and resistance levels that traders and investors alike should look out for.

  • $2,120: This is a critical support level that must hold for the bullish narrative to remain intact. It represents a line in the sand, and a break below this level could signal a weakening of Ethereum's momentum.
  • $2,400: Holding this level provides bulls with a strong foundation, but follow-through is needed. It indicates that buyers are actively supporting the price at this level.
  • $2,552: This is the current trading price of Ethereum, with an ascending trendline support just beneath. Monitoring this trendline is crucial for identifying potential reversals or continuation patterns.
  • $2,775: This is a key resistance level that has been tested multiple times, creating a clear line of demarcation between buyers and sellers. A sustained break above this level could target $3,025.
  • $2,800: Reclaiming this critical resistance level is crucial for bulls to confirm a breakout and reignite bullish momentum.

Potential Risks to the Altseason

We all know how volatile the cryptocurrency market is, and unexpected things can shake up the entire market in an instant. Some potential risks to the altseason include:

  • Regulatory Changes: Unexpected regulatory announcements or actions could negatively impact the entire crypto market, including altcoins.
  • Black Swan Events: Unforeseeable events, such as major security breaches or economic crises, can trigger market crashes and dampen investor sentiment.
  • Bitcoin Reclaiming Dominance: If Bitcoin suddenly regains significant dominance, it could pull capital away from altcoins and stall or reverse the altseason.

All signs point to an altcoin season just around the corner. The lesson here is do your homework, be careful and smart, and invest wisely.