The crypto market eagerly awaits the decisions of the US Federal Reserve. Altcoins display impressive performances, yet caution is advised due to certain technical indicators. This analysis delves into on-chain and chart signals to evaluate the potential for an alt season.
The first major signal that ignited the market was the Alt Season Index rising above 75. This indicator measures the performance of the top 50 altcoins against Bitcoin over a 90-day period. It’s a reliable barometer of risk appetite in the crypto market. Historically, when this index exceeds 75, it signals that most altcoins are outperforming Bitcoin, often triggering a phase of euphoria and rapid gains.
During the 2017 and 2021 cycles, the index remained above this threshold for weeks or even months, propelling altcoins to stratospheric valuations. However, this cycle is different. While more than 75% of altcoins are outperforming Bitcoin, many are only doing so by narrow margins. The rally is more selective, less explosive, and requires a more refined rotation strategy. Nevertheless, the signal is clear : The momentum is firmly with altcoins.
Beyond the Alt Season Index, other indicators confirm this bullish dynamic. The TOTAL3 chart, which represents the total market capitalization of altcoins (excluding Bitcoin and Ethereum), recently broke out of a triangle consolidation pattern that had persisted for several years. This breakout, if confirmed at the monthly close, could signal the beginning of a massive acceleration. Technical analysts see it as a classic “cup and handle” pattern, suggesting considerable upside potential.
This technical analysis is corroborated by spot market volume data. In September, for the first time in a long while, altcoins captured the largest share of total volume, surpassing both ETH and Bitcoin. This shift in capital flows toward riskier assets is a powerful marker of confidence and speculation, typical of advanced bull run phases.
Bitcoin dominance, which measures its market share relative to all cryptocurrencies, is a key indicator for the continuation of the Alt Season. After reaching a peak of 65%, it has fallen below 57%, freeing up capital flows to altcoins and fueling their rise. On-chain data, such as the MVRV indicator, shows that long-term Bitcoin holders aren’t selling massively, creating a stable environment conducive to risk-taking on altcoins.
However, several warning signals call for caution. The dominance in Open Interest reveals that altcoins are using significant leverage, exceeding that of Bitcoin. Historically, this type of signal precedes brutal corrections, and a short-term reset could occur, particularly with the upcoming FOMC meeting.
In summary, the altcoin market is at an inflection point. On one hand, technical and on-chain indicators suggest a continuation of the Alt Season with strong upside potential, while excessive speculation and macroeconomic uncertainty demand caution. The key for investors will be to be selective, quick, and rigorous in risk management to capitalize on opportunities in this volatile market.
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