Key Insights
- The altcoin market has shifted into an uptrend after forming a bullish divergence at recent lows, according to Michaël van de Poppe.
- Altcoin indicators are improving, but the market has not yet reached the threshold for a confirmed altcoin season, with profitability still limited.
- Van de Poppe expects the altcoin market to consolidate before potentially testing its previous all-time highs in Q4.
The altcoin market has started showing signs of stronger momentum as the fourth quarter begins. Analyst Michaël van de Poppe said the sector formed a bullish divergence near recent lows before shifting into an uptrend.
Van de Poppe said on October 1 that altcoin market capitalization was making a “strong bullish divergence.” He expected a period of consolidation before a possible test of previous all-time highs during Q4.
A bullish divergence signals that downward momentum may be weakening as market structure improves. However, the indicator does not confirm that prices will break higher, and subsequent price action remains necessary to validate the setup.
The Altcoin Market Is Improving, But Numbers Are Mixed
According to information from Coin Republic, dated September 22, the Altcoins Season Index on CoinMarketCap (CMC) has risen to 49 out of 100 points, up from 32 a week earlier and 40 a month earlier.
The index even reached 50 points on a daily basis. Glassnode’s alternative coin cycle indicator had turned from Bitcoin season to altcoin season, with the latest upward impulse covering a broader set of coins.
This expansion in the rally adds credibility to Van de Poppe’s bullish divergence, because the coins no longer follow the lead of Bitcoin.
However, the index still has a long way to go to reach the 75-point level of alternate season, as defined by CMC. So far, breadth has improved faster than profits.
One day later, the Coin Republic reported that less than 25% of the circulating supply of the median altcoin was in profit, according to Glassnode data as of September 23.
This means that more than three-quarters of the measured supply was below the cost basis of its owners.
This combination is becoming increasingly common, with prices in many coins rising despite many investors remaining negative.
With the recent increase in the number of coins, it should not be surprising to see a wide range of prices increasing while remaining below the cost basis.
TOTAL2 Adds Another Layer to the Altcoin Market Setup
According to the TOTAL2 cryptocurrency market capitalization (excluding Bitcoin), el_crypto_prof’s September 30 commentary added another element to the discussion.
He mentioned a breakaway from the multi-year downtrend and said the index was completing a retest similar to those recorded in 2016 and 2020.
He interpreted this information as the beginning of a potential third wave of the altcoin performance bull market.
In his accompanying research, he analyzed both the current state of the coin market and the potential for further increases in the context of cyclical trends.
He has cited several precedents in recent history for the evolution of the coin market structure preceding significant increases in the prices of alternative coins.
This is similar to the idea presented by Van de Poppe, although the two analysts used different methods to reach their conclusions.
The altcoin market performance now has two interesting technical elements, but neither of them directly indicates what will happen next.
Bitcoin Dominance Remains a Key Piece of the Puzzle
Ash Crypto has recently focused on the importance of Bitcoin dominance in the overall cryptocurrency market, and not only on altcoin season.
In his post dated September 30, he noted that Bitcoin dominance had been consolidating for about a year, so he paid particular attention to the 57.8% level as potential support.
At the same time, he indicated 61% as a potential level of resistance. A move below the lower threshold would be a key signal that it is time for alternative coins to rotate out.
The information is presented to provide a contrasting perspective on recent bullish statements.
On October 1, Bitcoin dominance, according to CoinMarketCap statistics, was 59%. At the same time, the Altcoin Season Index was at 61%, compared to 52% a week earlier and 23% a month earlier. The total market value of all cryptocurrencies was $2.87 trillion.
Q4 starts with a positive picture for the growth of the alternative coins market, building on a strong third quarter for most assets.
