Key Points
- Bitcoin’s dominance needs to reach between 62% and 70% for an altcoin season to commence.
- Market sentiment for altcoins was generally bearish in Q3 with Bitcoin dominance rising to around 57%.
Bitcoin Dominance and Altcoin Season
Bitcoin’s dominance in the market needs to reach between 62% and 70% for an altcoin season to start. However, several other factors across various metrics also need to be considered. In Q3, the market sentiment was generally bearish for altcoins, with Bitcoin dominance rising to around 57%, recording a new all-time high.
Typically, altcoins perform well after Bitcoin dominance peaks. As Bitcoin captures market share early in a cycle, capital often shifts to altcoins once BTC dominance starts to fade. This cycle benefits altcoins, as investors seek higher-risk, higher-reward assets.
The Role of Bitcoin’s Market Cap
From a statistical standpoint, Bitcoin’s market cap would need to grow by approximately $280 billion to fall within the 62%-70% range for an altcoin season to kickstart. This growth is likely to occur when BTC hits $80K, among various other metrics.
Over time, Bitcoin’s dominance has significantly declined, dropping from 90% in 2013 to a low of 39% in 2021, as altcoins began to gain traction. Notably, each altcoin season has been driven by specific catalysts, like the launch of new cryptocurrencies, technological innovations such as ERC-20 tokens, and broader trends like DeFi and NFTs.
Currently, altcoin market standings are too limited to drive a season independently, as altcoin losses often rely on Bitcoin’s returns for stability. For a shift to occur, Bitcoin would likely need to lead with an initial rise.
Market Confidence and Risk Appetite
A recent report highlighted an emerging shift in the altcoin market, calling for strategic measures from Ethereum developers to counter growing competition. Internally, this demands careful assessment, while externally, Bitcoin’s appeal suffers from a widening risk deficit, indirectly hampering altcoins from receiving their due momentum.
Historically, an upward trend in the BTC/Gold ratio has been aligned with altcoin season. Therefore, the current decline in risk appetite negatively impacts altcoin performance, indicating that a rising BTC/Gold ratio could serve as a signal for more favorable conditions ahead.
Impact of ETFs on Bitcoin’s Price
Another factor is the relationship between Bitcoin’s price surge and ETFs. The ETF market has experienced significant growth in 2024. However, when ETFs lead market momentum, funds tend to remain within Bitcoin or Ether rather than rotating into altcoins. Instead, capital is likely to flow into crypto-related stocks.
As a result, a blend of internal and external factors continues to postpone the onset of altcoin season, which remains closely tied to Bitcoin’s price performance. For altcoin season to materialize, Bitcoin would likely need to surpass $80K, a threshold that, given current dynamics, may be challenging to reach by the end of Q4.