Recently, Bitcoin (BTC) has hit record highs several times, once exceeding $123,000 per coin. Against the backdrop of Bitcoin's strong upward trend, there are significant signs of capital rotation within the crypto market, and a number of old and large altcoins that were previously relatively quiet are gradually becoming active, with their gains even exceeding Bitcoin's recent performance.

CMC market data shows that among the top 20 crypto assets by market capitalization, some “veteran” first-layer (L1) altcoins have performed outstandingly, with 7-day gains generally reaching double digits.

The leader is Stellar (XLM): As the 12th largest crypto asset by market value, it has a weekly increase of 82%, leading the pack among similar assets. ADA, which ranks 10th by market value, has a 7-day increase of nearly 30%, Ripple (XRP) 29%, and Dogecoin (DOGE) 18%.

Some relatively new altcoins, such as Sei (SEI), an L1 project focused on decentralized exchanges (DEX), and Ethena (ENA), a synthetic dollar protocol, also saw impressive gains, with a 7-day increase of more than 30%.

A recent research report by Delphi Digital pointed out that since January this year, the overall performance of old-line tokens with a long history and multiple bull and bear cycles has even surpassed the AI and DePIN (decentralized physical infrastructure network) concept tokens that were highly popular at the time.

The collective strength of old altcoins is interpreted as an early signal that retail funds may be flowing back. These tokens represent cryptocurrencies that have existed for a long time and have a larger market capitalization in the crypto market. Their activity often reflects the market participation and capital preferences of retail investors. At the same time, traders also pay attention to emerging projects with innovative narratives and high growth potential.

“BANANA ZONE 2.0” of altcoins

Market observer @MerlijnTrader monitors the TOTAL3 chart, which tracks the total market value of cryptocurrencies other than Bitcoin (BTC) and Ethereum (ETH) and is an effective indicator of the overall momentum of altcoins. He noted that the TOTAL3 chart is entering the "Banana Zone 2.0," which usually means that after a period of consolidation, the market will usher in an explosive breakout phase.

The trader believes that compared to the altcoin wave in 2020, the upcoming wave will be "bigger, faster, and backed by real-world use cases and huge amounts of money." This indicates that the altcoin market may no longer be just a speculative frenzy, but a more sustainable growth driven by fundamentals and institutional funds.

Signals of “Copycat Season”

According to the definition of the CMC Altcoin Season Index, when 75% of the top 100 altcoins, excluding stablecoins and wrapped tokens, have outperformed Bitcoin in the past 90 days, it officially enters the "altcoin season". This threshold reflects the broad market rotation of funds from Bitcoin dominance to diversified altcoin growth.

Currently, the Altcoin Seasonal Index is at 32/100, far from the 75-point threshold, indicating that the market is still in the Bitcoin-dominated phase. However, the recent positive upward trend of the index (from 26 points last week to 32 points today) suggests that early signs of rotation are emerging.

Key signs of the altcoin season include:

• Increased Altcoin Dominance: In past altcoin seasons, such as May 2021, the combined market cap of the top 100 altcoins exceeded 130% of Bitcoin’s total market cap. This expansion signals an increase in capital inflows into altcoins.
• Rapid price increases: Altcoins often experience dramatic price increases in a short period of time. In early 2021, the average return of large altcoins reached 174%, far exceeding Bitcoin's modest growth of only 2% during the same period.
• FOMO and retail frenzy: Altcoin seasons are usually accompanied by high 24-hour trading volumes and strong bullish sentiment. Market optimism leads to increased buying pressure, further driving prices up and attracting new participants.

An important feature of the current market is the decline in Bitcoin Dominance. Crypto analyst Satori observed that in historical cycles, when Bitcoin prices remain stable or rise moderately, while its share of the total crypto market value declines, this is usually seen as a sign of funds rotating from Bitcoin to altcoins, thus foreshadowing the possible arrival of the "Altcoin Season".

Satori pointed out that this pattern has been reflected in historical cycles such as 2017 and 2021. At present, altcoins have begun to perform generally, and trading volumes have steadily increased, indicating that institutional and retail investors may be diversifying their funds into alternative digital assets, which is due to the combined effect of multiple catalysts:

• The launch of spot ETFs: US spot Bitcoin and Ethereum ETFs provide a compliant entry channel for institutional funds, unlocking a large amount of institutional liquidity. When these funds flow into Bitcoin and Ethereum, some of the funds may overflow and flow to altcoins with higher growth potential.
• Progress in Layer 2 (L2) solutions: The development of L2 technology has improved the scalability and efficiency of L1 such as Ethereum, reduced transaction costs, and provided support for the implementation of more application scenarios, which in turn benefited the altcoins within its ecosystem.
• The combination of artificial intelligence (AI) and blockchain, the development of real-world asset (RWA) tokenization, and the improvement of blockchain gaming infrastructure have brought new value narratives and application prospects to altcoins, providing fundamental support.

Although it remains to be seen how long the "mini-altcoin season" will last, the positive signals released by the market indicate that investors are embracing risks again and injecting long-lost vitality into the market.