Is the altcoin season back? How Bitcoin’s surge impacts the crypto market

Amid tech stock turmoil, the crypto market shines, with a resurgence in Bitcoin, a rally in Ethereum, and notable gains in altcoins. Explore the factors driving this crypto boom.

Over the past week, the crypto market has witnessed a roller coaster of events. Bitcoin (BTC) has surged by over 21%. Its current market price stands at around $34,000, with a momentous 16-month peak recorded at $35,150 on Oct. 23.

But Bitcoin isn’t the only cryptocurrency basking in the limelight. Ethereum (ETH) has marked an impressive uptick of around 19%, currently valued at around $1,800. 

While these frontrunners make headlines, the altcoin market has offered its share of surprises. Chainlink (LINK) surged by a staggering 50%, now priced at around $11. Solana (SOL) witnessed a jump of 34%, clocking in at $32, and Polygon (MATIC) is up by 28% at $0.65.

So, what’s causing this impressive rally? Let’s try to peel back the layers of this resurgence, understand the factors influencing the current boom, and explore whether the altcoin season is genuinely making its much-anticipated return.

The buzz about ETFs

The current bullish momentum is resting on the fate of Bitcoin ETFs. At its core, an ETF functions like a basket of assets that tracks the performance of a particular index or sector. 

The appeal of a Bitcoin ETF, especially a “spot” one, is that it would be backed directly by real Bitcoin assets rather than derivatives or futures. This means investors get a more direct exposure to the asset’s performance.

The U.S. Securities and Exchange Commission (SEC) has historically been wary of approving a spot Bitcoin ETF. Their concerns stem from potential fraud, market manipulation, and the overall volatility of the cryptocurrency market. 

For many, the SEC’s stance has been a major roadblock to the mainstream acceptance of Bitcoin and other cryptocurrencies.

Recent events, however, hint at a possible shift in the SEC’s stance. Grayscale, a significant player in the cryptocurrency world, went to court against the SEC over the conversion of its Bitcoin Trust to an ETF. 

The court’s decision in Grayscale’s favor has ignited hopes. The SEC did not appeal this ruling and had been found to have acted “arbitrarily and capriciously” in denying Grayscale. 

What does this mean for other pending ETF applications? The implication is significant. The SEC might now be more inclined to reconsider and potentially approve other Bitcoin ETF applications.

When to expect a spot ETF?

Discussions have been buzzing within the cryptocurrency community. On a notable episode of Unchained Crypto, James Seyffart of Bloomberg Intelligence and Matt Hougan from Bitwise Asset Management echoed a shared optimism. 

They predict the introduction of a spot Bitcoin ETF before the significant date of January 10, 2024.

Their sentiment isn’t isolated. JPMorgan recently released a report that resonates with this optimism. The analysis suggests that the SEC is potentially gearing up to give the nod to multiple spot Bitcoin ETF applications in the upcoming months. 

This convergence of perspectives from different corners of the financial world adds weight to the anticipation, indicating that the winds of change are indeed blowing in the cryptocurrency realm.

Moreover, as Seyffart observed in a tweet, Bitcoin and its related brands like Grayscale are becoming more prevalent in day-to-day scenarios, such as airport advertising. 

Such public visibility not only showcases the growth of the cryptocurrency sector but also plays a pivotal role in its normalization among the masses. The more people see, hear, and familiarize themselves with crypto-related content, the faster its mainstream acceptance.

Tech stocks take a hit

On Oct. 25, seven major tech companies, often called the “Magnificent Seven,” saw their stock values drop significantly. 

These companies – Apple, Microsoft, Meta, Amazon, Alphabet (that’s Google’s parent company), Nvidia, and Tesla – are some of the biggest names in tech. Together, they make up a huge part of the stock market, specifically the S&P 500 index.

Analysts highlighted that this was the worst they’ve seen the tech stocks perform in a long time. And many regular people started searching terms like “stock market crash” on Google, showing they’re worried too.

While these big tech companies struggled, the world of crypto saw its value go up. In just one week, the total value of all cryptocurrencies combined increased by 18% from $1.08 trillion on Oct. 19 to $1.27 trillion as of this writing.

So, what does this mean? When traditional tech stocks aren’t doing well, cryptocurrencies might become a popular choice for investors. If tech stocks are shaky, people might see cryptocurrencies as a safer place to put their money.

Furthermore, with the upbeat momentum in crypto, some traders and investors might shift their money from stocks to digital currencies, eyeing quick returns.

Is the altcoin season back, and what to expect next?

Historically, Bitcoin often takes the lead during bullish market runs, capturing substantial attention and capital. 

After Bitcoin surges, there’s a tendency for capital to flow into alternative cryptocurrencies (altcoins) in what the crypto community fondly refers to as the “altcoin season”. 

This cycle has been observed in past bull runs of 2017-18 and 2020-21, with altcoins sometimes offering even more significant returns than Bitcoin in their prime.

To understand if we are currently amidst an altcoin season, it’s crucial to turn to the data. Historically, one hallmark of an altcoin season is when most of the top 100 altcoins register gains, often outpacing Bitcoin’s percentage increase. 

As of Oct. 25, not only has Bitcoin registered a substantial gain, but an overwhelming majority of the top 100 altcoins are also in the green. This synchronized growth across the board is reminiscent of previous altcoin seasons.

However, today’s scenario offers a nuanced picture. Bitcoin’s recent performance, marked by a 21% increase over just a week, has been formidable. Concurrently, major altcoins have seen substantial upticks, with some even outperforming Bitcoin in percentage terms. 

The broad-based rally indicates a distributed interest and capital infusion across the crypto spectrum rather than just a Bitcoin or altcoin-centric market.

Past cycles also indicate that during an altcoin season, Bitcoin’s dominance (its market cap as a percentage of the total crypto market cap) tends to decrease as altcoins collectively command a larger share of the market, which is not the case currently.

So, we might be at the beginning of a big upward trend. Usually, Bitcoin runs ahead and finishes its race before other coins even get going. So, while it’s exciting to see all the buzz, the real party for altcoins might still be a bit away. However, unexpected market shifts can happen in the volatile world of cryptocurrency, and forecasts may not always align with reality.

For now, the smart move is to keep a close eye on how Bitcoin is doing. Be careful with your money. Investing can be unpredictable, especially with all the ups and downs expected soon. Never put in more than you can afford to lose.