- Analysts say they expect altcoin momentum to grow.
- Catalysts include lower interest rates and regulatory clarity, analysts say.
Altcoin season has arrived.
It kicked off earlier in September as 75% of the top 50 coins had performed better than Bitcoin over the past 90 days, according to Blockchain Center, the crypto data company. The list excludes stablecoins.
The term altcoin season refers to a period when cryptocurrencies that aren’t Bitcoin outpace the biggest crypto when it comes to upside price action.
The rotation from Bitcoin into other cryptocurrencies will accelerate from here thanks to booming corporate treasuries, cheaper capital and regulatory tailwinds, analysts say.
Shane Molidor, founder of crypto investment bank and advisory firm Forgd, told DL News that the cyclical nature of Bitcoin and altcoin markets means investors “will likely rebalance incrementally, allocating capital to altcoins.”
The comments come as Bitcoin has dominated this cycle with roaring record prices and hype on Wall Street. Investors have ploughed almost $10 billion into Bitcoin exchange-trading funds so far this year, according to SoSoValue. Those funds are run by the likes of investment behemoth BlackRock.
Yet, the top crypto’s dominance has slumped by almost 6% over the past six months to take up 58% of the $4 trillion market, according to TradingView.
At the same time, CoinMarketCap’s alt season index is at 71, up from just 44 last month, while Coinglass’ tracker reached 80 out of 100, suggesting that altcoins are gaining momentum.
The data seemingly punctures hedge fund managers’ assumption that Bitcoin will dominate the market for some time yet.
Here are the top three drivers behind the altcoin rally.
The Federal Reserve
The altcoin bullishness comes as the US Federal Reserve is set to slash interest rates on Wednesday.
Investors see an interest rate cut as all but certain, according to the CME FedWatch tool. That will inject fresh liquidity into the global financial system.
Lower borrowing costs incentivises investors to bet on risk-on assets like cryptocurrencies, which tend to pump their prices.
As risk appetite grows, “we are likely to see a drill-down approach, whereby the top-ranking layer 2 and ecosystem tokens by TVL, volume, and protocol revenue become prime candidates for [treasury] inclusion,” Molidor said.
While most traders are betting that the US central bank will slash borrowing costs by 0.25%, there is a small chance that it goes even deeper with a 0.5% cut.
A bigger cut may trigger “a significant rally in crypto since no one is truly expecting it,” Kyle Chasse, founder of venture capital firm MV global, said in comments shared with DL News.
Treasury companies
Crypto treasury companies have emerged as leverage engines of this cycle, sucking in billions in institutional capital.
By issuing debt and buying crypto, digital asset treasuries, or DATs, create a reflexive flywheel for price action, Sean Dawson, head of research at Derive, said.
Annabelle Huang, founder of execution layer Altius, told DL News that momentum behind altcoin treasuries “will likely continue for high quality altcoins with sustainable revenue, at least as long as the DATs themselves have a sound structure, and continue to have access to cheap funding.”
Treasury firms are likely to pick tokens from battle-tested blockchains with sustainable tokenomics, an active ecosystem, and healthy user metrics, Huang argued
But “momentum will fizzle quickly for firms that don’t meet these two requirements,” she added.
The alts most likely to benefit from treasury firms seeking to capture extra upside are household-names like “Ethereum, Solana, Binance Smart Chain, Sui, along with their top performing ecosystem tokens,” Molidor said.
Regulatory clarity
Last week, crypto got its biggest endorsement yet from the US government.
Paul Atkins, Chairman of the US Securities and Exchange Commission, declared that “crypto’s time has come” and vowed to end years of hostility from the oversight agency.
The SEC’s Project Crypto initiative “will clarify that most crypto tokens are not securities, create a unified regulatory umbrella for trading, lending, and staking platforms,” dispelling years of controversy on altcoins.
The agency is currently reviewing more than 90 exchange-traded products, including altcoin applications for cryptocurrencies such as Solana, XRP, and Litecoin.
The SEC’s decision deadline for several of those applications begins in mid-October, with analysts like Balchunas predicting high approval chances for major altcoins like Litecoin and XRP. Some of those deadlines have been moved to mid-November.
The SEC’s commitment to creating more crypto rules comes on the back of US President Donald Trump’s embrace of digital asset and him championing pro-industry policies.
Bitcoin consolidation
For a full-scale altcoin rally like in past cycles, both profit rotation and confidence are key, Lukas Enzersdorfer-Konrad, deputy CEO of crypto exchange Bitpanda, told DL News.
“Once Bitcoin consolidates and investors begin rotating capital into higher-risk assets, we tend to see altcoins move more aggressively,” he said.
Crypto market movers
- Bitcoin is up 1.1% over the past 24 hours to trade at $117,200.
- Ethereum is up 0.5% over the past 24 hours trading at $4,540.
What we’re reading
- How the SEC is about to usher in ‘a ton’ of crypto ETFs — DL News
- UK set to announce closer co-operation with US on cryptocurrencies — Financial Times
- Dogecoin and XRP ETFs Could Launch This Week — Unchained
- Base token incoming? — Milk Road
- Coinbase rejects banks’ $6tn stablecoins warning— DL News
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email at lance@dlnews.com.
