Benjamin Cowen explains why the long-anticipated altcoin season has yet to occur in this market cycle. Through a mix of data-driven analysis and historical comparisons, he argues that macroeconomic conditions, particularly quantitative tightening (QT), have played a major role in suppressing altcoin performance against Bitcoin. Here’s what you need to know.
Why Alt Season Hasn’t Happened
Key Highlights:
- What is Alt Season? A period when Bitcoin dominance drops, and altcoins outperform significantly, both in USD and Bitcoin terms. Past examples include 2017 and 2021.
- Current Reality: Bitcoin dominance has steadily risen over the past three years, with altcoins consistently losing value against Bitcoin.
- Key Insight: The continued implementation of QT by the Federal Reserve has kept liquidity low, preventing the conditions needed for an altcoin rally.
Challenges Altcoins Face
- Increased Supply, Same Liquidity:
Key Highlights:
- Despite the launch of thousands of new altcoins, the overall liquidity in the crypto market hasn’t increased proportionally. This has spread investments thinner, diluting altcoin performance.
- Weak Alt-Bitcoin Pairs:
Key Highlights:
- Most altcoins, including Ethereum, have been steadily losing value when paired against Bitcoin. For example, 1 Bitcoin now buys significantly more ETH than it did in 2021.
- Economic Pressure:
Key Highlights:
- The current macro environment, marked by restrictive monetary policies and high inflation, has made speculative assets like altcoins less appealing to investors.
Key Metrics to Watch
Key Highlights:
- Social Risk Indicator:
Key Highlights:
- Social risk measures retail interest in crypto through metrics like YouTube views and Twitter engagement. Historically, alt seasons have coincided with rising retail interest. In this cycle, social risk has remained low, signaling a lack of broad retail participation.
- Alt-Bitcoin Pair Lows:
Key Highlights:
- According to Cowen, altcoins may need to hit deeper lows against Bitcoin before a meaningful recovery can occur, as seen in past cycles.
- Bitcoin Dominance (Excluding Stablecoins):
Key Highlights:
- When retail participation increases and Bitcoin dominance starts to drop, it could signal the beginning of an altcoin rally.
What Needs to Happen for Alt Season
Key Highlights:
- End of Quantitative Tightening:
Key Highlights:
- Past alt seasons have followed the Federal Reserve’s shift from QT to quantitative easing (QE). Without a Fed pivot, altcoin performance is unlikely to improve significantly.
- Bitcoin’s Role:
Key Highlights:
- Bitcoin needs to sustain a strong rally to draw retail investors back into the market. This increased retail activity could then spill over into altcoins.
- Market Cycles:
Key Highlights:
- Altcoin dominance tends to increase when the total altcoin market cap reaches parity with Bitcoin’s market cap, which hasn’t happened this cycle.
Final Thoughts
Key Highlights:
Closing Note: Stay cautious, focus on Bitcoin, and keep an eye on macroeconomic developments for signs of a Fed pivot. Alt season may eventually come, but it will likely require more time and a significant shift in market conditions.
- Benjamin’s Advice: Focus on preserving your portfolio’s Bitcoin (Satoshi) value rather than chasing speculative altcoin rallies. Altcoins are best viewed as oscillators that perform well in specific phases of the market cycle but often bleed value against Bitcoin during downturns.
- Be Realistic: While an alt season would be ideal for many investors, Cowen emphasizes separating "what we want to happen" from "what is likely to happen."
- Patience is Key: The current cycle may feel longer and more challenging, but history suggests altcoins could rebound strongly when macroeconomic conditions shift.
