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 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.
