At least according to some commentators in the crypto industry, the new altcoin season is approaching. Over the past month, altcoins (non-bitcoin cryptocurrencies) have seen sharp price increases, with projects like Solana, Cardano and Polkadot triple their native tokens. Although the “old season” was celebrated in a familiar atmosphere, there is still a lot to discover in the industry.

SOL price table | Source: Tradingview

One reason the old season is approaching is that the general sentiment surrounding Bitcoin has reached solid levels. Bitcoin withdrawals are flowing into more altcoin projects, leading to impressive growth in new tokens. But is there anything else?

When does the old season come?

Altseason is both good and bad for the crypto economy, but is a necessary kind of bad in the room. On the other hand, they signal market conditions, represent new inflows into the market and drive value peaks. After a while, however, speculation tends to outperform the utility of these tokens, resulting in steep corrections and high losses for speculators.

The crypto and digital asset space has flourished in recent years, but nothing much is new now, according to Hunain Naseer, senior analyst at OKEx Insights.

“ETH breaks out and starts to outperform BTC. The same thing happened in previous altseasons. ETH is leading the upward trend in the entire market and as long as it remains strong, the trend could continue until the end of the year. ”

The recent altcoin rally is driven by many factors, including the NFT boom (particularly in August), according to Naseer. This has reaffirmed the market’s confidence in the speculative value of digital assets. The positive news has also sparked new optimism for the market. Examples are the announcement of Ethereum’s London hard fork, the smart contract launch event on Cardano and cross-chain bridges on Cosmos.

Traditional “blue chip” project investments that gradually move into the space, like Bitcoin and ETH, can also reflect the current risk appetite of the market. Therefore, investors increase risk appetite due to better market prospects. Altcoins are obviously more volatile than Bitcoin due to their low market capitalization and lower liquidity, but they can quickly make investments worthless, but they also have potential.

The market capitalization of stablecoins rose from $ 36 billion in January to over $ 115 billion in mid-September, with the supply of USDT tripling over the same period. Stablecoins (though not exclusively altcoins) have become the most important means of transferring value in blockchain networks. This expansion shows the growing impact of DeFi on space.

A diversified portfolio can protect investors from risk while ensuring that they don’t miss any price spikes. That makes altcoins generally quite attractive as an investment, but where does the money come from? As altcoins inflows soar, there could be a massive sell-off of BTC, but institutions seem more optimistic about Bitcoin than ever.

According to Rachel Lin, co-founder and CEO of the decentralized derivatives exchange SynFutures, Bitcoin isn’t going to crash, it’s just slow to perform:

“I expect the crypto market as a whole to continue its upward trend over the next few months, especially as the Fed continues to ease policy, new funds and institutional investors come onto the market.”

Not just bitcoin and altcoins

A key difference between the previous Altseasons and this one is how ETH gained market dominance. Bitcoin accounted for almost 70% of market capitalization at the start of the year, while ETH accounted for less than 13%. At press time, ETH accounts for nearly 19% of the market, while Bitcoin’s dominance has dropped to 41%.

ETH price chart | Source: Tradingview

DeFi is attracting more institutional investors than any other industry before, and this is slowly bringing legitimacy and awareness to the space. Michael Tzezailidis, PR director of the Web 3.0 blockchain platform Telos, said:

“Even with a lot of competition and network congestion, Ethereum will continue to grow. The developers really throw themselves into the room. “

Many DeFi projects are currently active on the Ethereum network, and due to increased competition, it doesn’t look like it will slow down anytime soon. The altcoin market has grown from $ 220 billion to $ 1.35 trillion this year alone – an increase of about 600% in nine months with Ethereum playing a major role. Some people don’t even consider ETH to be an altcoin anymore, and that begs the question: will other altcoins eventually change category once they cross a certain threshold?

For some time now, Bitcoin’s primary value proposition has been store utility and deflationary supply, but while BTC will continue to attract investor attention, market cap will result in bigger short-term gains from the lower altcoins market. In addition, institutional capital is more likely to bet on altcoins with a smaller total market cap during the old season.

Ultimately, switching from Ethereum to PoS and protocol updates to drain the supply could make ETH a real contender for the crypto king. Investors are betting on a softer inflation curve for ETH and a stronger ecosystem, making it a benchmark asset for other altcoins to follow or compete with.

As people learn more about cryptocurrencies and their ability to solve global problems like remittances and monetary efficiency, more and more capital is pouring into the digital asset space. “Education is the key to solving everything,” said Cabital co-founder and CEO Raymond Hsu. In recent years, digital assets have opened up a new avenue and with the coming old season, blockchain is a more focused approach globally as it is better able to solve real-world problems.

According to Hsu, institutional investors will do what most retail investors did when they first explored the crypto world: buy bitcoin and then switch to ETH.

“Once they’re comfortable, they’ll look at other projects that tackle more complex challenges.”

Traditional financial institutions that spoke out against the concept of cryptocurrencies a year ago are now setting up trading desks and offering their customers a stronger digital asset presence across all financial instruments. Terms like “Bitcoin” and “Blockchain” are slowly becoming household names, and increasing adoption means that this old season will have more lasting effects.

While DeFi seems to thrive primarily on Ethereum, competing projects are laying the groundwork for a common, interoperable decentralized framework for the financial applications that blockchain will develop. While it may take them some time to start hosting more decentralized applications like Ethereum or even achieve a comparable level of composability, competition almost always benefits people. In decentralized systems, everyone is a user, and more competitive pressure will accelerate the space’s already rapid growth.

Altcoins have grown tremendously in the past two years, and as these projects continue to serve the needs of the blockchain space by solving backlog problems or improving existing solutions, the trend will continue to support funds.

Nobody knows if the old season is coming to an end, but a look at the markets reveals strong similarities with previous performances and the amount of positive news and innovative projects that are coming out. Often this altcoin season can even last a little longer than expected.

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Minh Anh

According to Cointelegraph

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