Despite the absence of a clear altcoin season, there is optimism among some analysts regarding a potential strong recovery in the sector.
Mathew Hyland pointed out that the resilience displayed by altcoins following the announcement by the Fed’s chair, Jerome Powell, regarding a modest approach to interest rate cuts and Quantitative Easing (QE), could indicate a bottoming out phase.
Hyland noted, “If you had mentioned yesterday that Powell would opt for no QE until rates hit zero, many would have expected a significant sell-off pushing prices to retest or even drop below previous lows. However, this scenario did not materialize, indicating a possible market bottom.”
Hyland further suggested that the bearish sentiment from the Fed might have been factored in during last week’s market downturn, leading to exhaustion among sellers.
Altcoin Season Index Hits a Crucial Level, Yet…
Viewed in context, most altcoins have experienced a decline ranging from 20% to 90% since late January, with some previously high-performing assets relinquishing their gains from the so-called November ‘Trump pump’. This collective decline has pushed the altcoin season index into a critical zone concerning Bitcoin’s performance.
Although historical data implies a probable recovery for the sector based on current positioning, other variables come into play.
An abundance of tokens vying for liquidity poses a challenge to a comprehensive recovery across the broader altcoin space.
Thus, only specific assets may witness a substantial resurgence if an altcoin season materializes.
Moreover, the elevated Bitcoin Dominance (BTC.D) represents a significant risk factor. Since December, BTC.D has surged from 55% to over 60%, diverting liquidity away from altcoins.
During the same timeframe, the altcoin market has contracted by almost $40 billion, shrinking from $1.64 trillion to $1.25 trillion.
Nonetheless, not all altcoins have been affected by the market decline. Assets like MANTRA [OM], Litecoin [LTC], and Hyperliquid [HYPE] have recorded impressive double and triple-digit gains in the past month.