On-Chain Data Analysis: When Will the Next Season of Altcoins Begin?
Original Author: Murphy, On-chain Data Analyst
On-chain Data Evaluation Model - Altseason
One day while I was in class, Xiaochi from @FC_0X0 sent me a message on WeChat saying, "There is a piece of data that shows the scissor difference between the total stablecoin inflow into exchanges and the USD value of withdrawn BTC, indicating the remaining potential buying power and the volatility of altcoins may have a direct relationship. Can we use this logic to explore the timing of altcoin seasons?"
Coincidentally, my lecture also mentioned observing data on the potential conditions of "capital outflow," which aligned with certain high-market-cap altcoins' launch timeframes. However, at that time, it was just a rough outline, vaguely hinting at some overlooked areas...
When I returned, I organized the data and, inspired by Xiaochi's idea, reconsidered a set of visual indicators that can effectively assess the "Altseason." Here, I share my train of thought:
Altseason Condition 1: Capital Outflow Evaluation
(Chart 1)
In Chart 1, the green color indicates whether the total stablecoin inflow into exchanges in the last 30 days is greater than the USD value of BTC withdrawn from exchanges. If it is, it means that, besides buying BTC, there is also a possibility of outflow into altcoins. The higher the green signal bar, the greater the theoretical outflow value, indicating a stronger prerequisite for the Altseason initiation.
From the data perspective, during the periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical outflow value was the highest, implying a higher likelihood of the Altseason occurring during these two periods. Additionally, there was a brief period between August and September, but in terms of both scale and duration, it was not as strong as the two aforementioned periods, making its influence relatively weaker.
Altseason Condition 2: Inflow of Mainstream Assets
(Chart 2)
Historically, BTC often leads the overall sentiment of the crypto market, followed by market confidence flowing into other high-market-cap mainstream coins before further tilting towards alts. Visualizing this capital rotation involves using the 30-day change in realized market cap of BTC and ETH, along with the total supply of stablecoins (as shown in Chart 2). When all three major mainstream assets experience net capital inflows, it signals that the market sentiment is becoming exuberant, overall risk appetite is rising, which is also one of the macro necessary conditions to kickstart the Altseason.
From the data, it can be seen that during the periods of 2023.10-2024.8 and 2024.10-2024.12, all three major mainstream assets experienced net capital inflows, peaking in March 2024 and December 2024. This is also the most FOMO moment in market sentiment so far in this cycle.
Altcoin Season Indicator 3: Positive Momentum in Altcoin Market Cap Disparity
(Figure 3)
The third condition required to determine the start of the altcoin season is the isolation of positive momentum in the disparity of altcoin total market capitalization. We need to identify time periods within the altcoin space where the 7D SMA of total valuation is greater than the 30D SMA of total valuation. Because this can represent an amplification of altcoin valuation in the short term, and liquidity flowing into altcoins is rapidly increasing.
In Figure 3, the red line represents the 7D average, and the blue line represents the 30D average; from the data, during the periods of 2023.10-2024.4 and 2024.11-2024.12, the red line crossed above the blue line, indicating that liquidity in the crypto space is starting to tilt towards altcoins, and altcoin market cap is shifting towards positive momentum growth.
Summary
These three conditions are considered from different perspectives: Condition 1 represents the potential for capital overflow; Condition 2 represents overall sentiment and risk appetite; Condition 3 represents liquidity skew. When all three conditions are met simultaneously, it is highly likely that the altcoin season is approaching.
The current Condition 2 is met, but Conditions 1 and 3 are not; therefore, we can consider that the foundation for the altcoin season is there, but liquidity is still concentrated in mainstream assets (especially BTC), and on-chain funds have not overflowed significantly into altcoins.
However, we can also see that the "negative overflow" in Condition 1 is gradually diminishing, which is a positive signal. Although altcoin season anticipation may require some more patience, what is supposed to happen will happen.
The content shared in this article is for communication and research purposes only and should not be considered as investment advice.
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