Altcoin Season? BTC Dominance Fades But Crypto Market Grows $210B

Perspectives:

  • Bitcoin Dominance (BTC.D) hit a 2-year high of 55% on December 4, but has entered a strong downtrend since then, indicating that investors are now channeling funds into altcoins and memecoins.
  • The global cryptocurrency market capitalization grew by $210 billion between December 4 and press time on December 9, while BTC.D contracted 3%.
  • The TOTAL3 chart shows that altcoins have attracted $64 billion in capital inflows in December alone, marking the start of the long-awaited altcoin season.

Bitcoin Dominance (BTC.D) hit a 2-year high of 55% on December 4, but has since entered a strong downtrend, indicating that investors are redirecting funds to the altcoin market to diversify their portfolio and amplify profits.

Has this started the long-awaited altcoin season?

What is altcoin season?

Altcoin season is a popular crypto terminology that refers to a phase of a market boom cycle in which alternative cryptocurrencies (altcoins) are outperforming Bitcoin (BTC) and Ethereum (ETH).

Historical trends have illustrated that cryptocurrency boom cycles often begin with capital flowing into the market first. btc and ETH. But as the market bounce gains momentum and evolves into a full-blown bullish rally, investors begin to reallocate capital toward smaller-cap altcoins and memecoins.

Cryptocurrency investors often shift their focus toward altcoins (any other cryptocurrency outside of BTC and ETH) during a market rally for two main reasons: diversifying their portfolio and amplifying their profits.

As the current cryptocurrency market rally extends into its third consecutive month, strategic investors have begun looking for signs to determine if altcoin season has begun.

Altcoin season begins with Bitcoin dominance fades 3% this week

Altcoin season appears to have begun, based on some of the critical on-chain data trends observed this week. Bitcoin Dominance (BTC.D) is an important indicator that offers some early clues that the altcoin season has begun.

BTC.D represents Bitcoin market dominance, that is, the proportion of the total cryptocurrency market capitalization that is held by BTC.

While BTC's price rally cooled this week, popular altcoins like Solana (SUN), Avalanche (AVAX) and Dogecoin (DOGE) everything accelerated to double-digit profits. In fact, BTC.D has witnessed a notable drop this week.

While Bitcoin dominated the cryptocurrency market rally since mid-October, the chart below illustrates how BTC.D hit 55.12% on Sunday, December 3, the highest level since April 2021. But this week, altcoins have gained ground, while the price of Bitcoin consolidated. Therefore, BTC.D fell sharply by 3% between December 3 and 10.

Bitcoin Domain (BTC.D), December 2023 | Fountain: TradingView

The Bitcoin Dominance indicator (BTC.D) is a vital metric that investors can use to track the change in market momentum towards altcoins.

When BTC.D starts to trend down (as seen in the blue trend line above), while the total cryptocurrency market capitalization increases, it means that altcoins have started to gain greater market share during last week.

If this phenomenon persists, some of the largest-cap altcoins would like to hit new highs as investors funnel billions into the markets.

Global crypto market capitalization grew by $210 billion despite BTC decline.D

The growth in cryptocurrency market valuation this week also provides another layer of confirmation that altcoin season has begun.

Since the rally began around October 10, the total cryptocurrency market valuation has increased by $590 billion. However, Bitcoin alone accounted for $333 billion, or 56% of all capital that flowed into the cryptocurrency market during that period.

Global cryptocurrency market capitalization, December 2023 | Fountain: Coin Market Capitalization

However, market momentum appears to have tilted towards altcoins. This week, the total crypto market capitalization grew by $210 billion. Only $85 billion (40%) of that amount went into Bitcoin, while the remaining $125 billion was invested in altcoin markets.

TOTAL3 – Total crypto market capitalization excluding Bitcoin (BTC) and Ethereum (ETH) | Fountain: TradingView

The TOTAL3 chart, which represents the total crypto market capitalization, excluding Bitcoin (BTC) and Ethereum (ETH).

As seen above, altcoins attracted over $64 billion in capital inflows over the past week. This further affirms the stance that cryptocurrency investors are now allocating 60% of capital to altcoins.

Therefore, if Bitcoin (BTC.D) dominance continues to shrink while global market capitalization rises, the altcoin season could come into full swing in the coming weeks.

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