Is Bitcoin about to break its historical high, is there still hope for altcoins?

With the rise of Bitcoin this week, its price has approached $73,600, just under $200 away from its all-time high. As of the writing of this article, Bitcoin's dominance (BTC.D) has reached 60%, marking the first time in nearly three years that it has hit this level. As shown in the figure below.

In previous articles, we mentioned that based on historical experience (data), when Bitcoin's dominance reaches the range of 65-70%, it usually heralds the arrival of altcoin season, during which various altcoins tend to surge. Although historical experience does not necessarily represent the present, and this cycle has many differences from previous cycles—such as this bull market being primarily driven by ETFs and the emergence of a large number of new projects that dilute liquidity—the arrival of altcoin season is still something to look forward to.

A couple of days ago, a partner shared an OTHERS data indicator in the group, as shown in the figure below.

From the indicator shared in the above image, it appears to be a typical head and shoulders bottom pattern, and it seems to be forming the right shoulder. There may be a breakout point between positions (2) and (3); once it breaks out, it is likely to pull back to position (4) before continuing upward to position (5).

Currently, the total market capitalization of altcoins is still fluctuating. Overall, the altcoin season in this bull market seems to be in a relatively lagging state. So, when can we expect the next round of altcoin season?

The BTC.D indicator mentioned earlier is regarded by many as an important metric for gauging when altcoin season will arrive. The underlying logic here is quite simple: as Bitcoin's price rises, some Bitcoin holders in the market will begin to sell their Bitcoin for profits, which means they will hold a large amount of cash (USDT/USDC) afterward. This cash may flow into the altcoin sector for speculation, pushing up the prices of certain altcoins and causing the altcoin sector to rotate upward. This process will also attract more on-chain and off-chain funds to join the speculation, thus forming an altcoin season.

However, for retail investors, most are often late to the game. The process described above has a strong retrospective nature; in other words, when you notice that Bitcoin's dominance is starting to decline, altcoins have often already begun to rise. At this point, retail investors tend to chase in based on news trends, and most will end up as bag holders, as the rotation in the altcoin sector can happen very quickly.

So, how can retail investors try to avoid this situation?

First, focus on the mindset:

The core idea here is to ensure that you can stay ahead of other retail investors by using more reliable methods from various dimensions. The specific application of reliable methods may require different perspectives. For example, I have noticed that some partners in the group are good at forming their own indicators, and even use different groups they join to observe the sentiment and activity levels within the groups to assist in making entry or exit decisions. As shown in the figure below.

Second, focus on strategy:

There are many factors to consider in this area. In addition to the BTC.D indicator and the OTHERS indicator mentioned above, previous articles discussing altcoin season have also mentioned USDT.D, ETH/BTC exchange rate, TOTAL3, Altseason index, etc. Interested partners can search for and review historical articles.

In addition to using various on-chain indicators for strategic assistance, macroeconomic factors are also crucial for us to study and pay attention to, such as US Net Liquidity (the net liquidity of the US dollar, calculated by analyzing the Federal Reserve's balance sheet and other macroeconomic factors).

If we combine the TOTAL3-USDT-USDC data indicators with the US Net Liquidity indicator, we will find that changes in US net liquidity can serve as a reliable reference indicator or signal for altcoin season. As shown in the figure below.

This is not difficult to understand; the liquidity in the crypto market primarily depends on the liquidity of the US dollar. When US dollar liquidity is on the rise, as more funds flow into higher-risk assets, altcoins often perform better. Conversely, when US dollar liquidity contracts, the market capitalization of altcoins tends to decline.

Therefore, by tracking US dollar liquidity, we can further understand the liquidity situation in the crypto market, thereby judging the potential timing for the arrival of altcoin season. Of course, liquidity data indicators are something everyone can look at; what we need to understand is that such indicators also have a lagging nature and need to be considered alongside policies (Federal Reserve monetary policy).

Generally, it takes about 4-8 months for changes in the Federal Reserve's policy to fully reflect in the market. For example, in May of this year, the Federal Reserve adjusted its balance sheet reduction plan, announcing that starting in June, it would reduce the monthly limit for US Treasury bond sales from $60 billion to $25 billion (Note: Slowing down balance sheet reduction means reducing the speed of capital recovery, which helps maintain ample funds in the market). This is a potential signal of policy change, and theoretically, we might see some positive reflections in the market starting in September of this year. You can compare the performance of the US stock market or the crypto market since September to see this.

Next, we need to pay close attention to the two upcoming FOMC meetings of the Federal Reserve, scheduled for November 6-7 and December 17-18. As shown in the figure below. If the Federal Reserve announces further interest rate cuts at that time, it will be a new clear signal, and we may welcome greater market opportunities in the near future.

In summary, by paying attention to some on-chain indicators, US dollar liquidity, and the Federal Reserve's monetary policy, we can better anticipate market trends, including the timing of potential altcoin season.

However, it is important to remind that while we mentioned that the arrival of altcoin season is something to look forward to, it does not mean that all altcoins will have opportunities for explosive growth. The main reasons for this have been discussed in previous articles about altcoins, and here is a brief recap:

• There are too many projects born in this cycle, even to the point of being described as massive, which will lead to severe dilution of liquidity. Even if we do welcome a new round of so-called altcoin season, only a portion of tokens may have the opportunity to break through; we should recognize this broader new trend of altcoin season.

• This bull market is primarily driven by ETFs, and the inflow/outflow of ETF funds is more influenced by sentiment. This portion of funds can be classified as off-chain funds and will not directly (or entirely) flow into altcoins in the crypto market.

• Many VC projects born in this cycle start with low circulation and high FDV. Project teams and institutions are continuously offloading, leaving retail investors stuck, making it difficult to pump (even if they do pump, it will only be while offloading, with no vision from the project team). Instead of spending a lot of money to pump, project teams might as well start a new project to offload again.

• The narrative of MemeCoins in this cycle has attracted almost all retail investors' attention, and many retail investors may prefer to play with lower market cap, higher odds tokens.

• As for some older coins from the previous cycle, due to the large number of trapped investors, it is even harder to pump. If the project team pumps, it means giving trapped investors a chance to break even, and project teams are unlikely to make such foolish moves. This serves as a reminder not to become obsessed with any altcoin; it is best to take profits when possible (at least withdraw the principal) or continue to convert to Bitcoin.

As described by partners in the group: last year, as long as it was a new track, you could make money by entering early, while this year is hellishly difficult. In the later stages of a bull market, it often seems like everyone can easily make money, but in the end, you will find that there are actually more people losing money.

We have reason to believe that in the next year or so, the crypto market will become more interesting. Before the end of this year, we may continue to face BTC time (but the market is volatile, and there may be significant fluctuations in the next two weeks, so be cautious with leverage). In the first or second quarter of next year (2025), we may welcome Altcoins time. If you are not yet disappointed or disheartened by this bull market, please continue to focus on accumulating and holding your most favored positions, while also considering planning your exit strategy for the bull market.

That's all for this issue. More articles can be viewed on the Huali Huawai homepage. The above content is merely personal opinions and analyses, intended for learning records and communication purposes, and does not constitute any investment advice.