The cryptocurrency market has been abuzz with excitement over the prospect of an altcoin season (altseason) in recent weeks. Speculative traders have been eagerly awaiting this period, which typically marks a significant surge in the value of alternative cryptocurrencies, or altcoins. However, according to a market analyst, the determining factors for an altcoin season may have changed this time around.
Stablecoin Liquidity: The New Key Indicator
The crypto market is undergoing a rapid transformation, with changes in cycle indicators, market structures, and trading patterns emerging at an unprecedented pace. CryptoQuant CEO Ki Young Ju has shed light on the evolving nature of altseason, stating that it is no longer defined by asset rotation from Bitcoin (BTC). In a recent post on X, he explained:
"Altseason is no longer defined by asset rotation from Bitcoin."
Instead, Ju noted that altcoin trading volume has become more prevalent against stablecoin and fiat currency pairs. This shift in focus suggests that the market is moving away from traditional signals marking the beginning of an altcoin season.
The Changing Nature of Altseason
In the past, an altcoin season was typically characterized by a rotation of capital from Bitcoin to altcoins. However, with the increasing popularity of stablecoins, the dynamics of the market have changed significantly. Ju highlighted this point:
"The combined altcoin trading volume for Bitcoin pairs has remained significantly low over the last few weeks despite an uptick in Ether (ETH) price over the same period."
Furthermore, several top-performing altcoins, such as XRP and Solana (SOL), are near their all-time highs, while Bitcoin’s price has been consolidating under $100,000. This divergence between the two largest cryptocurrencies suggests that the market is undergoing a fundamental shift.
The Rise of Stablecoin Liquidity
A key chart highlighting the increase in aggregate altcoin trading volume for stablecoin pairs demonstrates a clear correlation with growth in ETH price. Ju attributed this trend to "real market growth rather than asset rotation."
Aggregate altcoin trading volume for BTC and stablecoin trading pairs
As evident from the chart, the spike in aggregate altcoin trading volume for stablecoin pairs has increased in tandem with growth in ETH price. This phenomenon can be attributed to the rising liquidity and stability of stablecoins.
A Deeper Evolution in the Crypto Market
Ju emphasized that this change suggests a deeper, more sustainable evolution in the crypto market. The increasing popularity of stablecoins is driving a fundamental shift in the way capital flows into the market.
"The nature of capital flowing into Bitcoin has shifted compared to previous market cycles."
Unlike the retail-driven capital flows in previous bull cycles, the current bull market is primarily driven by institutional capital flows into spot Bitcoin exchange-traded funds (ETFs). This change in investor behavior will undoubtedly have far-reaching consequences for the market.
Fresh Liquidity and Altcoin Market Capitalization
Meanwhile, the market capitalization of all cryptocurrencies, excluding BTC, remains well below its all-time high. Ju noted that this indicates reduced fresh liquidity from new exchange users:
"For altcoins to reach a new all-time high market capitalization, they will require a significant influx of fresh capital to crypto exchanges."
The Altcoin Season Index
The performance of the altcoins seems to coincide with an improvement in the altcoin season index. This indicator demonstrates that 73% of the top 50 altcoins have outperformed Bitcoin over the past 90 days.
Altcoin season index
With this index edging closer to the 75% threshold, market participants should keep a close eye on it as it may signal the beginning of an altcoin season in the next few days.