Altcoin Season?

Despite favorable price trends in mainstream cryptocurrencies and the U.S. stock market, confidence in altcoins appears to be at an all-time low. Many are disappointed and incredulous due to unmet expectations from previous cycles, resulting in stagnant returns in their portfolios.

Market sentiment in the crypto space is often unpredictable and exaggerated, especially with overexposure. Social media sentiment is unreliable for forming an accurate market outlook, but charting relevant data can help analyze the severity of the situation.

Over the past year and a half, while the total market cap of cryptocurrencies has significantly grown, volatility remains surprisingly low. Bitcoin's new all-time highs have not surpassed the levels seen during the 2021 frenzy, primarily due to altcoins failing to keep pace. Less capital has flowed into more speculative assets than expected, catching many off guard.

This time, Bitcoin has continually gained more market share during its rise, leaving altcoins far behind. The once-profitable game of catching up between Bitcoin and other markets has turned into a pipe dream, with liquidity shortages stifling any attempts to spark a widespread altcoin season.

Despite Ethereum's flat price performance and ridicule, it maintains a leading position. Speculators positioning themselves with on-chain ecosystem tokens have had a tough time. Indicators for identifying favorable conditions for entering or exiting alternative markets have been sending worrying signals, suggesting that general perceptions of market dynamics may not apply to the current situation.

Main asset correlations have proven useful in determining the current market state. By combining an oscillation tracking the difference between major assets, participation levels can be configured and subsequently used for fusion. Low oscillation values alongside rising Bitcoin prices are typically seen as buy signals, implying that altcoins are undervalued and will eventually follow Bitcoin's trend. Recent data shows shorter and weaker bullish periods for altcoins, favoring short-term investments over uncertain long-term frames.

Although many seemingly promising tokens show high upside potential, they struggle to deliver outstanding returns. Compared to Bitcoin and Ethereum, the performance of the top 250 market cap tokens is disappointing, reflecting the overvaluation of the two major assets and further dampening market sentiment.

Clearly, the situation has changed over time. Identifying trends and narratives is more crucial than ever to outperform indices. The days of universal cryptocurrency gains seem over, with liquidity dispersion and declining trading volumes concentrating significant gains in a few tracks. General indicators suggest altcoins are struggling as a whole, showing little appreciation, though they mask varying growth among individual asset groups.

Examining market cap changes since the rebound began reveals that most established categories fall below the benchmark. Conversely, emerging tracks with many opportunities, appeal, and new developments perform very well. Exceptional cases may exist in any industry, and growth within curated groups only vaguely represents the assets covered.

Memecoins Memecoins are undoubtedly the theme of this cycle. Last year, memecoins spawned overnight riches more frequently than lotteries, while also draining considerable wealth. Despite high expectations, the total valuation percentage change for memecoins wasn't as significant due to the dominance of coins like Dogecoin and Shiba Inu. Most meme activity happened on Solana and recently on Base, with top returns from Solana-based memecoins.

DeFi DeFi tokens show dismal price returns, with only Pendle and The Graph standing out. Traditional protocols, despite their high valuation and use rates, have proven poor investments without yield strategies to offset depreciation. A recurring theme is the lack of use cases for DeFi tokens besides liquidity mining.

L1s Layer 1 blockchains, traditionally showing robust price performance due to Bitcoin and Ethereum's leadership, saw many L1 tokens achieving multiple growth, with Solana emerging as a standout.

L2s Layer 2 tokens show mediocre returns, with significant value growth seen in concepts related to zero knowledge and Bitcoin infrastructure.

Conclusion Given the harsh market realities and liquidation emails, one might think altcoins are outdated. It’s clear that without following certain trends, winning on Bitcoin and Ethereum has become increasingly difficult. The negative sentiment from these prices implies a need to rebalance portfolios and consider risks. The future of the altcoin market remains uncertain, but it's hard to imagine it getting worse.