Transcription
2017 and 2021 both delivered monster alt seasons, with alts going up 1,000%, 5,000%, 10,000%. It was absolute madness. But so far this cycle, things have been a little bit more muted. Sure, we had a run last year back in April. We also had a run in November, December, but largely many of the major altcoins have struggled to pump. So, the question is, are we going to see some remnants of alt queen season this cycle? And if so, what will it look like? Is it going to look like the previous alt seasons? We obviously know this cycle’s different. How exactly are things going to pan out?
Well, I’ve been spending the last couple of weeks trying to answer this question, but not just on my own. What I’ve done is I’ve built a comprehensive AI model using my own inputs and using thousands of other data inputs across the web to come up with the perfect AI framework that tells us exactly when altcoin season is going to begin. By the end of this video, you will have a clear understanding of when altcoins are going to rally this cycle and the exact triggers to make sure you are positioned in altcoins this cycle. So sit back, relax, and let me share with you the model that I’ve built and the reasoning behind it. If you do enjoy content like this, make sure to click the subscribe button and hit that post notification bell for daily crypto alpha.
So firstly, let me set the scene as to why this cycle has been different so far, and then we’re going to get into the exact AI model. In the last 90 days, only 19 out of the top 100 altcoins have outperformed Bitcoin. This is the lowest reading that we’ve seen since 2019. And many old coins continue to make lower lows versus Bitcoin as Bitcoin dominance continues to skyrocket towards the 70% mark. To understand why things are so different this cycle, we need to understand the macro backdrop, because this is a key factor that went into building my altcoin indicator model.
Back in 2020 and 2021, we had the most stimulus of all time in response to the pandemic. This was money printing on an unprecedented scale. People were receiving multi-thousand-dollar stimulus checks, which increased their disposable income to put into the crypto market. Yet, a bunch of people locked down bought at home gambling on altcoins. And this is primarily the reason why the altcoin market exploded. We also know that the biggest periods of growth in Bitcoin and altcoins tend to happen during monetary easing environments. Currently, we are in a monetary tightening environment. So, the Fed is actually shrinking its balance sheet. So, there’s less free-flowing cash in the economy. When the Fed’s balance sheet increases, there’s more capital in the economy, and there’s more disposable income in people’s pockets to feel more comfortable going into riskier asset classes like crypto.
But that’s not the only reason we haven’t seen a crazy altcoin season yet. The institutionalization of Bitcoin, the ETFs, BlackRock, and adoption on that front has definitely segmented the market. But we’re seeing less and less of a wealth effect from Bitcoin into Ethereum into altcoins this cycle because instead a lot of people are simply buying Bitcoin through the ETFs. Meaning Bitcoin is running on its own accord, and altcoins aren’t benefiting in the same fashion. That’s a big contributor as to why we’ve seen Bitcoin dominance going up and why we haven’t seen a major altcoin run so far.
Another thing we haven’t really seen yet this cycle is Ethereum massively outperforming. Now, there are signs maybe the tide is starting to turn a little bit for Ethereum, but thus far overall it has been going down versus Bitcoin. And that’s another trigger for altcoin season that we haven’t seen.
And the final point I want to bring to your attention as to why we haven’t seen an altcoin season is the fact that retail hasn’t really had a reason to be interested in crypto. Yes, a lot of people came into the memecoin casino on Pump Fund, but a lot of those people also got wrecked and ended up leaving, just like people last cycle got into crypto and got burnt on things like UST and FTX and ended up leaving. That did, in many ways, irreparable damage to the space, at least in the medium term. And that stuff takes a lot of time to heal. The constant scams, the constant grifts make it very hard for people to trust the space and have only driven more investors and traders out of the space. And the latest memecoin season certainly didn’t help, as even some of the top meme coins that got launched on exchanges went down only. So onchain and centralized exchange users both got wrecked.
If you look at market participation, it’s still incredibly narrow. This is also evidenced if you want to look at the altcoin season index, which measures how the top 50 altcoins are performing versus Bitcoin over the past 90 days. And you can see that this is sitting below 30, which is around the Bitcoin season territory. And we’ve only had very brief periods where altcoins have actually started to outperform Bitcoin on this index. They’ve pretty much been hovering around the bottom for the majority of this cycle. And that’s a clear sign that Bitcoin is firmly in control and the interest for altcoins hasn’t been there this cycle.
And it’s for all these reasons that I’m fairly confident that this altcoin season, or this next altcoin rally, which we’re going to dive into, is going to be completely different from the others. There’s no crazy stimulus. There’s no wealth effect from Bitcoin. And a lot of market participants feel burnt and aren’t coming back. And for that reason, this is going to be a very different cycle and has been so far.
So, taking these beliefs that I’ve just run you through and taking thousands of other data points across the internet and also my own threads and my own thoughts, which I imported into ChatGPT, I’ve developed a thesis which I’ve back-tested on the charts, which is a model that tells us exactly when alt season is likely to begin. The model hinges on the core thesis that I’ve developed that altcoin season 3.0 will be a shorter and sector-selective alt season. So, not a typical alt season due to the fact that global liquidity is still constrained and altcoin supply is far more diluted than prior cycles. A full-blown alt cycle, therefore, requires: one, Bitcoin dominance rolling over; two, Ethereum establishing outperformance; three, broad-based altcoin breadth; and four, a clear narrative plus stablecoin liquidity tailwinds. The ARS model collapses those prerequisites into one actionable score that you can use to spot the altcoin season.
So, let’s run through the step-by-step checklist on the ARS model. The first pillar that is important to trigger an altcoin season is Bitcoin dominance momentum starting to shift. So far this cycle, we’ve seen Bitcoin dominance essentially go up only. A rotation into altcoins can’t start while dominance is continuing to rise. The raw metric we’re using to determine a shifting in the Bitcoin dominance momentum is the 21-day change in percentage points and spot level. So for Bitcoin dominance to enter the green threshold, this is the threshold where we determine that altcoin season is activated, you need Bitcoin dominance to reverse 4 percentage points and have a spot close below 60%.
Moving on to ETH/BTC. This is the second major pillar behind alt seasons in crypto. Ethereum leadership historically precedes broad altcoin rallies. So to be in the green threshold, we need a close above the 200-day MA and a new 90-day high.
The third pillar which determines an alt season is the altcoin season index itself. This index is from 0 to 100. But what we want to see is the altcoin season index above 40 and rising for two consecutive weeks. That would put us in the green threshold for an altcoin season.
And finally, we want to look at the narrative momentum and sentiment. And the way to do that is by tracking the retail search demand and the fresh stablecoin ammunition coming into the space. So by looking at the Google Trend score and the stablecoin quarter-on-quarter percentage change, we can determine how much liquidity and retail interest is coming into the space. For the green threshold to be triggered, we want to see Google Trends above 30 and the stablecoin market cap going up 8% quarter-on-quarter.
And remember, these aren’t just random numbers. These are numbers that we’ve back-tested using AI, putting it through multiple tests over a couple of weeks to get the exact numbers that lined up with past altcoin seasons. But the key distinction here is that it’s not just back-testing based on two cycles. We’ve also put in our new set of requirements based on our personal beliefs and my personal belief and also the data that’s relevant to the current market as well to develop this altcoin season 3.0 thesis.
Now, not all of these pillars are taken evenly. We’ve defined an exact weighting which gives this indicator more accuracy. So, Bitcoin dominance has a weighting of 35%. This is the most important pillar. The ETH/BTC Z-score has a weighting of 25% in the overall altcoin season rating, which we’re going to get into in a second here. The breadth index has a 20% weighting, and then the narrative pulse has a 20% weighting as well.
Here’s how we calculate the altcoin season score. Each pillar gets a score. Zero is red, 0.5 is yellow, and one is green. Zero is when none of the criteria have been hit. 0.5 is if half of the criteria has been hit, and one is when all of the criteria have been hit. You take those individual scores combined with the weightings for each of the altcoin season requirements here, and this will end up giving us a number of where we are at any given moment in terms of the altcoin season trigger. I’m going to tell you very shortly where we are right now. Remember 0.70 for seven consecutive days means that an alt season has just been triggered. And if you see a consecutive period where we are increasing from, let’s say 0.3 to 0.4 to 0.5, you know something’s brewing, and thus you know to pay attention. By the way, I’m going to leave this entire model for free in the description below. So, you can actually use this on your own to track when there’s going to be an altcoin season. So, you’ll you’ll never have to ask the question again, when altcoin season.
So, let’s look at the current readings. Right now, we have Bitcoin dominance at a 0.5 score. ETH/BTC at a 0.5 score is sitting on the 200-day moving average, but we don’t have a 90-day high, hence why it’s yellow. For breadth, we are currently zero because we’re not above 40 on the altcoin season index, and it hasn’t been rising for two weeks. So, that gets a zero. And then for the narrative pulse, we have Google Trends of 20 and a stablecap growth of plus 6.5% quarter-on-quarter. So if we look at the total score and we run the weighted calculations, as you can see through the calculation here, you can determine that we’re currently sitting at an altcoin season score of 0.33. Now remember, for an altcoin season to be triggered, we need to be above 0.7. This gives you an idea as to where we are at any given moment in time.
These are the requirements for the market right now to flip into altcoin season territory. We need Bitcoin dominance closing below 60%. Still got some ways to go, but this is the number one chart to keep track of. We need ETH/BTC to print a weekly close above the 200-day MA and make a fresh 90-day high. It has started to gain some momentum, but it still hasn’t shown the continuation just yet to confirm altcoin season. For number three, we need the alt season index to climb above 40 and rise for two weeks. This is still a little bit away as well, but that is an important prerequisite. And finally, we need the Google trends to increase and the stablecoin supply to marginally increase, although that is one of the stronger metrics on this list.
Any three pillars green simultaneously for seven days equals an ARS score of above 0.70. It doesn’t need to be one. So, not every single thing needs to hit for it to be altcoin season, but we do need to reach that weighted 0.7 or that 70% threshold in order for it to be considered alt season. And obviously, the fun of the altcoin market happens between 0.7 and 1. So, there will be periods, and this happened in 2021 and 2017, where we actually pushed into the 0.9 to 1 region, and we stayed there for a matter of weeks. That is where you make the most gains in the market. This period is a period of accumulation and then eventually head to 0.7. That is your trigger for alt season, and then that is where the fund begins.
But remember, as we discussed before, alt season is totally different this cycle. I’m using that as the lingo because it’s understandable and relatable. Um, but really you can call this alt season 3.0. It’s going to be very different. You’re going to see certain sectors outperforming; the entire altcoin market can’t go up all at once due to the lack of liquidity, the current monetary conditions alongside the altcoin dilution. This means that the metrics here are likely going to be triggered by the outperformance of specific sectors like RWA and like AI and other hot narratives, utility which are going to push the market forward as opposed to everything going up all at once.
I’ve gone through some of the green flags, but what I also want to do is go through some of the red flags or invalidation triggers for you to go more defensive. If Bitcoin dominance snaps back above 65%, this is a trigger to reduce altcoin exposure. If ETH/BTC loses the 200-day moving average and falls 5% in a week, then you can look at playing the Bitcoin pair instead of the Ethereum pair. If the altcoin season index breaks below 25 after a failed rally, then you can treat the rally as a dead cat and move into more defensive positioning. And if the stablecoin growth stalls, then you can expect muted alt upside because that is a sign that not as many retail participants are coming into the market, thus minting new stablecoins in the market.
So those are the green flags and these are the red flags. So hopefully now you are fully equipped to spot when altcoin season is triggering. In the description below, I’ll leave the full model so you can use it to calculate where we currently are in the market. And you can also make your own tweaks based on some of your assumptions, cuz remember some of my personal assumptions and data has also gone into this to make our total altcoin season index here. But hopefully now you have a tangible way to spot where we are in the market. That is better than just looking at dominance in isolation or is better than just looking at the altcoin season index in isolation. If you enjoy content like this, make sure to subscribe to the channel, click the post notification bell for daily crypto alpha, and I will see you in the next one. Have a nice rest of your day. Peace out. [Music]