Old coins lead the surge, has the mini "shanzhai season" begun?

Author: BitpushNews

Recently, Bitcoin (BTC) has repeatedly refreshed its historical high, once breaking through $123,000 per coin. Against the backdrop of Bitcoin's strong upward movement, significant signs of capital rotation are emerging within the crypto market, with a batch of previously relatively quiet large-cap altcoins gradually becoming active, with their gains even surpassing Bitcoin's recent performance.

CMC market data shows that among the top 20 cryptocurrencies by market capitalization, some "veteran" Layer 1 (L1) altcoins have performed outstandingly, with weekly gains generally reaching double digits. The leader is Stellar (XLM): as the 12th largest cryptocurrency by market cap, it has a weekly gain of 82%, leading among similar assets. ADA, ranked 10th by market cap, has a weekly gain of nearly 30%; Ripple (XRP) 29%; Dogecoin (DOGE) 18%.

Some relatively newer altcoins, such as the L1 project Sei (SEI), which focuses on decentralized exchanges (DEX), and the synthetic dollar protocol Ethena (ENA), have also shown impressive gains, with weekly increases exceeding 30%.

A recent research report from Delphi Digital pointed out that those long-established tokens that have gone through multiple bull and bear cycles have outperformed the AI and DePIN (Decentralized Physical Infrastructure Network) concept tokens that were in the spotlight since January this year.

Analysts noted that the collective strength of veteran altcoins is interpreted as an early signal of retail funds possibly flowing back. These tokens represent cryptocurrencies that have existed for a longer time and have larger market capitalizations, and their activity often reflects retail market participation and funding preferences, while traders also remain focused on emerging projects with innovative narratives and high growth potential.

The "BANANA ZONE 2.0" of Altcoins

Market observer @MerlijnTrader monitored the TOTAL3 chart, which tracks the total market capitalization of cryptocurrencies excluding Bitcoin (BTC) and Ethereum (ETH), effectively reflecting the overall momentum of altcoins. He pointed out that the TOTAL3 chart is entering the "Banana Zone 2.0," which typically indicates that after a period of consolidation, the market will enter a phase of explosive breakout.

The trader believes that compared to the altcoin wave of 2020, the upcoming market will be "larger, faster, and supported by real-world use cases and massive funding." This suggests that the altcoin market may no longer be merely speculative frenzy but rather driven by fundamentals and institutional funding for more sustainable growth.

Signals of "Altcoin Season"

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

Currently, the altcoin season index stands at 32/100, still far from the 75-point threshold, indicating that the market remains in a Bitcoin-dominated phase. However, the index has recently shown a positive upward trend (rising from 26 points last week to 32 points today), suggesting that early signs of rotation are emerging.

Key signals for the arrival of altcoin season include:

• Strengthening dominance of altcoins: In past altcoin seasons (such as May 2021), the total market capitalization of the top 100 altcoins exceeded 130% of Bitcoin's total market cap. This expansion marks an increase in capital flowing into altcoins.
• Rapid price increases: Altcoins often experience dramatic gains in a short period. At the beginning of 2021, the average return of large altcoins reached 174%, far exceeding Bitcoin's modest growth of only 2% during the same period.
• FOMO sentiment 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 up prices 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's price remains stable or rises moderately while its share of total crypto market capitalization declines, it is often seen as a sign of funds rotating from Bitcoin to altcoins, indicating the potential arrival of "altcoin season."

Satori pointed out that this pattern has been evident in historical cycles such as 2017 and 2021. Currently, altcoins have begun to perform widely, with trading volumes steadily increasing, indicating that institutional and retail investors may be diversifying their funds into alternative digital assets, driven by a combination of multiple catalysts:

• Launch of spot ETFs: The introduction of spot Bitcoin and Ethereum ETFs in the U.S. provides a compliant entry channel for institutional funds, unlocking significant institutional liquidity. Once these funds flow into Bitcoin and Ethereum, some may spill over into altcoins with higher growth potential.
• Advances in Layer 2 (L2) solutions: The development of L2 technology enhances the scalability and efficiency of L1s like Ethereum, reducing transaction costs and supporting the landing of more application scenarios, which in turn benefits altcoins within their ecosystems.
• The combination of artificial intelligence (AI) and blockchain, the development of real-world asset (RWA) tokenization, and the improvement of blockchain gaming infrastructure have all brought new value narratives and application prospects to altcoins, providing fundamental support.

Therefore, while it remains to be seen how long the "mini altcoin season" can last, the positive signals released by the market indicate that investors are re-embracing risk, injecting much-needed vitality into the market.