Analysts say this key metric suggests an altcoin season is coming

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Bitcoin’s 65 percent rebound from below $ 29,500 on July 20 to a swing high of $ 48,200 on August 14 took less than a month and helped boost the crypto market and the traders who saw the prospect another feared adding new upward momentum to the ongoing bear market.

Currently, the BTC rally has stalled near the $ 46,000 price level, and this period of sideways trading gives altcoins an opportunity to step forward. As the graph below shows, the total market cap of the altcoin market has increased 80% since July 20th. Meanwhile, the Bitcoin dominance rate has dropped 10% since July 30th.

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Bitcoin Dominance vs. Total Altcoin Market Cap, 1-Day Chart. Source: TradingView

Data from TradingView shows that the dominance rate of Bitcoin has increased in the past few weeks, but that trend fizzled out for Bitcoin on July 30th when a number of altcoin projects spiked due to a market-wide oversold spike, new partnerships, and protocol updates.

DeFi and NFT projects reach record highs

Projects focusing on non-fungible tokens (NFTs) and decentralized funding (DeFi) have been the top altcoin winners over the past four weeks.

Last month’s three biggest winners include Axie Infinity Shards (AXS), Solana (SOL) and Terra (LUNA), all of which hit new record highs on August 17th.

AXS / USDT vs. SOL / USDT vs. LUNA / USDT 4-hour chart. Source: TradingView

As shown above, the AXS price increased nearly 400% while LUNA and SOL increased 340% and 187% respectively.

An interesting observation is that a few days after the London Hard Fork was implemented on the Ethereum network, Solana and Terra saw increased interest.

While the London Hard Fork introduced several beneficial changes to the Ethereum network, including a token-burning mechanism that has the potential to make Ether deflationary, the upgrade did little to solve the high transaction cost problem. This left the door open for competing layer one solutions like Solana and Terra to gain market share.

Related: Eth2 staking contract is largest Ether hodler at $ 21.5 billion

Analysts announce the start of the altcoin season

The rise in altcoins has led many traders to predict the start of a new altcoin season. According to “The Moon,” a pseudonymous Twitter analyst, altcoin seasons follow a sharp spike in BTC price, especially when the price falters or pulls back.

Another clue to the start of an alt season is the increasing number of altcoins that have hit new all-time highs in the past two weeks. Double-digit daily profits and price breakouts from projects like Audius and memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) are making headlines, and Crypto Twitter is full of chatter about the hottest altcoins to watch.

Despite these strong performances, it’s interesting to note that the altcoin seasonal index has actually hit its lowest level in two years, as highlighted in the following tweet.

What this means in the long run needs to be interpreted, but an optimistic assumption is that the altcoin rally over the past two weeks is just a prelude to the real altcoin season that doesn’t have to start yet.

To date, Bitcoin continues to be the leading market indicator that sets the future direction of the overall crypto market, but data shows that periods of consolidation often give altcoins the opportunity to push up.

If Bitcoin’s price falls back to $ 40,000 or below, most analysts would expect altcoin prices to move south as well. On the flip side, a rally above the $ 48,000 mark will likely cause altcoin prices to rise.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every step of investing and trading involves risk and you should do your own research when making a decision.