Following an impressive surge, the alternative cryptocurrency market recently experienced a significant downturn post the US elections.
With substantial sell-offs witnessed over the past couple of days, investors are now questioning the sustainability of the momentum driving the altcoin season.
In the same timeframe, the altcoin season index dropped from 88 to 65, signaling a deceleration in the momentum of the altcoin season.
What Lies Ahead for Alternative Cryptocurrencies?
The market correction and subsequent liquidation were somewhat expected given the overheated conditions of the previous week, with funding rates reaching a 9-month peak.
This correction has now reset the funding rates for altcoins, a development viewed positively by analysts as it sets the stage for a potential recovery.
Unlike the elevated funding rates observed last week, reaching double-digit percentages, the rates have now fallen below 10% in the last two days. This decline indicates a reduced reliance on leverage for altcoin investments, a setup often associated with a bullish trend.
Despite the positive signs stemming from healthier funding rates, Bitcoin’s Dominance (BTC.D) remains a crucial variable influencing the momentum of altcoins.
The recent surge in altcoin performance was, in part, fueled by a decrease in BTC.D from over 60% to below 55%.
At present, BTC.D has climbed beyond the 55% mark, suggesting a shift towards Bitcoin over altcoins during the recent downturn in the altcoin market.
In response to these dynamics, analyst Benjamin Cowen highlighted that altcoins could face challenges if BTC.D returns to its compression range. Essentially, a sustained increase in BTC dominance might impede the progress of the altcoin rally.
On a different note, Ethereum (ETH), considered another gauge of altcoin performance, managed to defend the $3.5K support level, instilling confidence among analysts regarding a potential strong recovery. Such a scenario could reignite the momentum of the altcoin season.
Meanwhile, notable performers in the sector, like Hedera (HBAR) and Ripple (XRP), experienced significant declines in their prices over the past week.
HBAR dropped by 13% to $0.28, while XRP saw a 12% decrease, briefly slipping below $2. Tron (TRX) suffered the most with a sharp 30% decline during the same period.