Evaluation from on-chain data: When will the new round of altcoin season start?

Author: Murphy, On-chain Data Analyst

On-chain Data Evaluation Model ------ Altcoin Season

One day, while I was in class, Xiao Chi @FC_0X0 sent me a WeChat message saying: "There is a data point, which is the difference between the total inflow of stablecoins to exchanges and the USD value of BTC withdrawn, that is, the remaining potential purchasing power may have a direct relationship with the volatility of altcoins. Can we use this logic to look at the timing of the altcoin season?"

Coincidentally, my lecture materials also mentioned data observations regarding the potential conditions for "capital overflow," which corresponded to the timing of certain large-cap altcoins. However, at that time, it was only a rough outline, and I vaguely thought of some previously overlooked areas…

After returning, I organized the data and, inspired by Xiao Chi's thoughts, reimagined a set of visual indicators that can effectively judge the "altcoin season." Here are my thoughts:

Altcoin Season Condition 1: Capital Overflow Condition Assessment

(Figure 1)

In Figure 1, the green indicates whether the total scale of stablecoins inflow to exchanges within 30 days is greater than the USD value of BTC withdrawn from exchanges. If so, it means that these funds have the potential to overflow into altcoins in addition to buying BTC. The higher the green signal bar, the greater the theoretical overflow value, thus the more likely it is to trigger the altcoin season.

From the data, during the periods of 2023.10-2024.3 and 2024.11-2024.12, the theoretical overflow value is at its maximum, indicating a higher likelihood of an "altcoin season" occurring during these two periods. Additionally, there is a small segment between August and September, but in terms of scale and duration, it is not as significant as the above two periods, thus its influence is relatively weak.

Altcoin Season Condition 2: Capital Inflow of Mainstream Assets

(Figure 2)

Historically, BTC often leads the overall sentiment in the crypto market, followed by market confidence flowing into other large-cap mainstream coins, and finally tilting further towards ALT. The tool to visualize this capital rotation is to use the 30-day changes in the realized market capitalization of BTC and ETH, as well as the total supply of stablecoins (as shown in Figure 2). When all three mainstream assets show net capital inflow, it indicates that market sentiment is starting to heat up, and overall risk appetite is increasing, which is one of the macro necessary conditions for starting the altcoin season.

From the data, during the periods of 2023.10-2024.8 and 2024.10-2024.12, all three mainstream assets simultaneously experienced net capital inflow, peaking in March and December 2024. This is also the time point of the highest FOMO sentiment in the current cycle so far.

Altcoin Season Condition 3: Positive Momentum in Altcoin Market Cap Dispersal

(Figure 3)

The data basis for judging the start of the altcoin season also requires a third condition, which is to isolate positive momentum in the dispersal of total altcoin market capitalization. We need to find periods where the total valuation of the 7D SMA within the altcoin range is greater than its 30D SMA total valuation. Because, this can represent that the valuation of altcoins is amplifying in the short term, and liquidity flowing into altcoins is rapidly increasing.

In Figure 3, the red line represents the 7D average, and the blue line represents the 30D average; from the data, during the periods of 2023.10-2024.4 and 2024.11-2024.12, the red line crosses above the blue line, indicating that liquidity in the crypto space is starting to tilt towards altcoins, and the market cap of altcoins is entering a phase of positive momentum growth.

Conclusion

The above three conditions are considered from different perspectives: Condition 1 represents the possibility of capital overflow; Condition 2 represents overall sentiment and risk appetite; Condition 3 represents liquidity tilt. When all conditions are met, it is highly likely that the altcoin season is about to arrive.

Currently, Condition 2 is met, but Conditions 1 and 3 are not satisfied; thus, we can consider that the foundation for starting the altcoin season is present, but liquidity is still concentrated on mainstream assets (especially BTC), and there is not much overflow of funds into altcoins.

However, we can also see that the "negative overflow" in Condition 1 is slowly narrowing, which is a positive signal. Although the altcoin season that friends are looking forward to may still require some patience, what is meant to come will eventually come.

The content shared in this article is for communication and research purposes only and should not be considered as investment advice.