Author: Murphy, Source: Author's Twitter @Murphychen888
One day when I was in class, Mr. Xiaochi @FC_0X0 sent me a WeChat message saying: "There is a data, which is the difference between the total inflow of stablecoins into exchanges and the dollar value of BTC withdrawn, that is, the remaining potential purchasing power and the volatility of altcoins may have a direct relationship. Can we use this logic to see the timing of the launch of altcoins?"
Coincidentally, the data observation on the potential conditions of "capital overflow" was also mentioned in my courseware, which just corresponds to the launch time nodes of some large-cap altcoins. However, it was just a rough outline at the time, and I seemed to think of some places that were previously omitted...
After I came back, I sorted out the data and, according to the ideas inspired by Mr. Xiaochi, re-conceived a set of visual indicators that can effectively judge the "altcoin season". Here is my thoughts:
Figure 1
The green in Figure 1 indicates whether the total amount of stablecoins flowing into the exchange within 30 days is greater than the USD value of BTC withdrawn from the exchange. If so, it means that in addition to buying BTC, these funds may also overflow into altcoins. The higher the green signal column, the greater the theoretical overflow value, and the more the preconditions for the launch of the altcoin season are met.
According to the data, the theoretical spillover value is the largest in the two periods of October 2023-March 2024 and November 2024-December 2024, which means that the possibility of a "copycat season" is higher in these two periods. There is also a short period between August and September, but it is not as large or lasting as the above two periods, so its influence is relatively weak.
(Figure 2)
Historically, BTC tends to lead the overall sentiment of the crypto market first, and then market confidence will flow to other large-cap mainstream coins, and finally further tilt to ALT. The tool to visualize this capital rotation is to use the 30-day changes in the realized market value of BTC and ETH and the total supply of stablecoins (as shown in Figure 2). When these three major mainstream assets all show net capital inflows, it is considered that market sentiment begins to be excited and overall risk appetite rises, which is also one of the necessary macro conditions for the start of the cottage season.
From the data, the three major mainstream assets simultaneously saw net capital inflows in the two periods of 2023.10-2024.8 and 2024.10-2024.12, and peaked in March and December 2024. This is also the time point when market sentiment is the most Fomo so far in this cycle.
(Figure 3)
The data basis for judging the start of the Alt Season also requires a third condition, which is to isolate positive momentum in the discrete market value of altcoins. We need to find a time period when the total valuation of the 7D SMA within the altcoin range is greater than its total valuation of the 30D SMA. Because, this can represent that the valuation of altcoins is amplified in the short term, and the liquidity flowing into altcoins is increasing rapidly.
In Figure 3, the red color is the 7D mean and the blue color is the 30D mean. From the data, the red line crosses the blue line in the two periods of 2023.10-2024.4 and 2024.11-2024.12, which means that the liquidity of the currency circle begins to tilt towards altcoins, and the market value of altcoins is turning to a stage of positive momentum growth.
The above three conditions are considered from different perspectives. Condition 1 represents the possibility of capital overflow; Condition 2 represents overall sentiment and risk preference; Condition 3 represents liquidity tilt. When they are met at the same time, there is a high probability that the altcoin is coming.
Currently, Condition 2 is met, but 1 and 3 are not met; then we can think that there is a basis for launching the altcoin season, but liquidity is still concentrated in mainstream assets (especially BTC), and there is not much on-site capital overflow to altcoins.
However, we can also see that the "negative overflow" in condition 1 is slowly shrinking, which is a positive signal. Although the cottage season that friends are looking forward to may have to wait patiently, it will come.
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