On one side is fire, and on the other side is seawater; altcoins urgently need a splash of wealth.
Written by: Socra, Golden Finance
As the U.S. election approaches its conclusion, Bitcoin's volatility has intensified, with prices hitting new highs while corrections have become more pronounced. As a result, altcoins are generally in a dismal state, with even meme coins, which previously generated wealth effects, showing signs of stagnation.
Data shows that 95% of the popular tokens from 2017 have now faded from the market, such as LTC, XMR, and ETC. In this cycle, most VC coins have not experienced a surge after listing and have instead plunged into an unseen abyss. So, will the long-awaited altcoin season still arrive for investors?
### 1. Bitcoin's Season, Altcoin's Winter
On November 3, TradingView data showed that Bitcoin's market dominance (BTC.D) rose to 60.52%, setting a new high for this bull market (from September 2022 to now). Meanwhile, the total valuation of the altcoin market, excluding the top ten cryptocurrencies by market cap, relative to Bitcoin's market cap (OTHERS/BTC), has dropped to 0.16, meaning it only accounts for 16% of Bitcoin's market cap, marking a new low since January 2021.
According to Coinmarketcap data, the altcoin season index indicates that in the past 90 days, only 25% or fewer of the top 100 cryptocurrencies have outperformed Bitcoin, indicating that we are currently in Bitcoin's season.
Research firm Matrixport also stated that there are over 20,000 cryptocurrencies in the market, but attention remains highly concentrated on Bitcoin, and the altcoin craze has yet to arrive.
Regarding this situation, which is both fiery and watery, analysts believe that the cryptocurrency market has been "directionless" since April, and the uncertainty surrounding the U.S. election has led to increased volatility in the crypto market, exposing the fragility of altcoins.
In addition, the decline of altcoins from nearly the beginning of this year to the end can be attributed to several key reasons:
1. Insufficient Liquidity
The founder of CryptoQuant stated that the crypto industry is in crisis, with altcoins performing poorly this year due to a lack of capital inflow. The crypto industry itself resembles a game where players derive dopamine from it. However, the absence of builders exploring new technologies has made crypto projects less attractive.
Moreover, he noted that while the continuous growth of stablecoin supply is a positive phenomenon, the new trading volume is insufficient to create adequate buyer liquidity. Currently, the total market cap of stablecoins is about $166 billion, but only 21% of stablecoins are used for trading, far below the 50% seen in 2021.
2. Cycle
Crypto analyst Willy Woo stated that the current altcoin cycle is significantly different from previous ones, marking the third large-scale loss for retail investors since 2017, with the altcoin cycle gradually weakening. The DeFi and NFT waves of 2020-21, along with the current meme coin craze, have continuously harmed retail investors. Although altcoins may still rebound after each Bitcoin rise, overall, the strength of the altcoin cycle is gradually diminishing.
Renowned trader Eugene also mentioned that altcoins that have seen price drops of 80-90% since their launch are approaching reasonable valuation levels. Each unlocking presents a bullish opportunity for diamond-handed participants to accumulate more tokens.
3. Lack of Value Accumulation
Zhu Su: VC coins lack value accumulation and belong to the category of Memecoins. The cryptocurrency market will produce countless assets with market caps between $50,000 and $500 million, while assets with market caps between $500 million and $50 billion are relatively scarce.
Famous investor Naval also stated that most crypto projects will fail because the founding teams become wealthy too early and do not recruit new members.
4. Regulatory Crackdown
On November 2, the Blockchain Association disclosed data showing that since Gary Gensler took office as the SEC Chairman, the U.S. crypto industry has spent over $400 million to respond to the agency's enforcement actions. During this period, the SEC has filed lawsuits against several large crypto companies, including Coinbase and Kraken.
### 2. Can Altcoins Welcome Spring Again?
Historically, altcoins have experienced multiple explosive periods; however, the wealth effect in this bull market seems to be more evident in Bitcoin and meme coins. Whether altcoins will have another opportunity for significant gains in the future has led to differing judgments from various institutions.
1. Bullish Outlook
Bitwise Chief Investment Officer: Regulatory clarity after the U.S. election is more important for altcoins. Whether Trump or Harris wins, the regulatory environment for Bitcoin is improving. This is positive news for Bitcoin, especially for other cryptocurrencies.
In the short term, the crypto market seems to favor a Trump victory over a Harris win, but in reality, institutions are entering this space, adoption rates are rising, and ETF capital inflows are ongoing. If Trump wins, I expect altcoins to rise more than Bitcoin. Regardless, I believe both will go up.
Galaxy Digital's research director also stated that Trump's victory would be more beneficial for altcoins compared to Bitcoin, mainly because regulatory easing would help altcoins more than Bitcoin.
Data from analysis firm CryptoQuant shows that Korean traders are positioning themselves in quality altcoins, expecting altcoins to strengthen in Q4. Additionally, trading volume data from Korean exchanges indicates that people are turning to high-beta (volatility greater than market volatility) altcoins.
10x Research founder Markus Thielen also mentioned in a recent report that quick-moving traders are seizing opportunities to buy their favorite altcoins in large quantities, anticipating strong gains in the fourth quarter.
On-chain analyst Ali stated that the arrival of altcoin season is just a matter of time, and its market cap may exceed $1 trillion.
Bitfinex: Altcoins may outperform Bitcoin in the coming months. If Bitcoin's dominance indeed reaches a local top, we might see a period where altcoins outperform the market in the coming months. If macroeconomic pressures ease, it could lay the groundwork for a bullish Q4.
MN Trading founder Michael van de Poppe expects the altcoin bull market to begin with the next Federal Reserve meeting's interest rate cut.
CZ stated that 2024 could be a "recovery year," and historically, the year following a "recovery year" has been a bull market.
2. Bearish Outlook
MNNC Group COO: The strong performance of Bitcoin and Ethereum is eliminating some altcoins, and industry consolidation will continue.
Willy Woo: The current cycle is a "meme bubble casino," and I recommend trading altcoins rather than holding them. The market cap calculation for altcoins is flawed because this metric only reflects the sum of successful projects, while failed projects are not counted. Altcoins are an insider game, much like a casino, where the house will ultimately win.
Regarding when altcoins will stop falling and stabilize, Into The Cryptoverse founder Benjamin Cowen stated that the liquidation of altcoins should end by December 2024 (at the latest by the second week of January 2025), marking a long journey.
### Summary
In most cases in the past, Bitcoin's rise would lead to a surge in altcoins, but this year seems somewhat special. Bitcoin repeatedly hits new highs, while most altcoins continue to test bear market price levels. The intensity of altcoin corrections and the duration of their lows are testing investors' financial acumen. However, the crypto space is inherently high-risk, and ordinary investors need to conduct their own due diligence (DYOR).
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