Signs of fund rotation in the crypto market are emerging, and established alts are performing actively.

Recently, the price of Bitcoin (BTC) has continuously set new highs, breaking through $123,000/coin at one point. Against this backdrop, there is a noticeable phenomenon of capital rotation within the crypto market, with some previously relatively quiet large altcoins starting to become active, and their gains have even exceeded Bitcoin's recent performance.

Market data shows that among the top 20 crypto assets by market capitalization, some "vintage" first-layer (L1) altcoins have performed outstandingly, with a weekly increase generally reaching double digits. Among them, Stellar (XLM), ranked 12th by market capitalization, has seen a weekly increase of 82%, leading among similar assets. ADA, ranked 10th by market capitalization, has a weekly increase of nearly 30%; XRP has increased by 29%; DOGE has increased by 18%.

In addition, some relatively new alts, such as the L1 project SEI focused on decentralized exchanges (DEX) and the synthetic dollar protocol ENA, have also shown impressive gains, with a 7-day increase of over 30%.

A recent research report pointed out that long-established tokens, which have experienced multiple bull and bear cycles, have outperformed the AI and DePIN (Decentralized Physical Infrastructure Network) concept tokens that were highly regarded at the time since January of this year.

The strengthening of established alts is interpreted as an early signal that retail funds may be returning. These tokens represent cryptocurrencies that have been around for a longer time and have a larger market capitalization in the crypto market, and their activity often reflects retail market participation and funding preferences. At the same time, traders are also keeping an eye on emerging projects with innovative narratives and high growth potential.

alts's "BANANA ZONE 2.0"

Market observers are monitoring the TOTAL3 chart, which tracks the total market capitalization of cryptocurrencies excluding Bitcoin (BTC) and Ethereum (ETH), effectively reflecting the overall momentum of alts. He noted that the TOTAL3 chart is entering the "Banana Zone 2.0," which typically indicates that after a period of consolidation, the market is about to enter a phase of explosive breakout.

The observer believes that compared to the altcoin wave of 2020, the upcoming market trend will be "larger, faster, and supported by real-world use cases and substantial capital." This suggests that the alts market may no longer be merely a speculative frenzy, but rather a more sustainable growth driven by fundamentals and institutional funds.

Signal of "alts season"

According to the definition of the altcoin season index, when 75% of the top 100 alts have outperformed Bitcoin in the past 90 days, excluding stablecoins and wrapped tokens, it officially enters "altcoin season". This threshold reflects a broad market rotation of funds from Bitcoin's dominance to diversified altcoin growth.

Currently, the alts season index is at 32/100, far from the threshold of 75 points, indicating that the market is still in the Bitcoin dominance phase. However, the index has recently shown a positive upward trend (rising from 26 points last week to 32 points today), suggesting that early rotation signs are emerging.

Key signals for the arrival of altcoin season include:

• The dominance of alts has strengthened: During the previous altcoin season (such as May 2021), the total market capitalization of the top 100 alts exceeded 130% of Bitcoin's total market capitalization. This expansion marks an increase in capital flowing into alts.
• Rapid price increase: Alts often experience dramatic price surges in a short period of time. At the beginning of 2021, the average return of large alts reached 174%, far exceeding Bitcoin's modest growth of only 2% during the same period.
• FOMO sentiment and retail frenzy: Altcoin season is usually accompanied by high 24-hour trading volumes and strong bullish sentiment. Market optimism leads to increased buying pressure, further driving up prices and attracting new participants.

An important feature of the current market is the decline in Bitcoin Dominance. Crypto analysts have observed that during historical cycles, when the price of Bitcoin remains stable or rises moderately while its share of the total crypto market capitalization declines, this is typically seen as a signal of funds rotating from Bitcoin to alts, thereby indicating the possible arrival of "Altcoin Season."

Analysts point out that this model has been reflected in historical cycles such as 2017 and 2021. Currently, alts have begun to show widespread performance, with trading volume steadily increasing, indicating that institutional and retail investors may be diversifying their funds into alternative digital assets, stemming from the combined effects of multiple catalysts:

• Launch of spot ETFs: The United States' spot Bitcoin and Ethereum ETFs provide a compliant entry channel for institutional funds, unlocking a significant amount of institutional liquidity. When these funds flow into Bitcoin and Ethereum, some of them may overflow into altcoins with higher growth potential.
• Advances in Layer 2 (L2) solutions: The development of L2 technology has improved the scalability and efficiency of L1s such as Ethereum, reduced transaction costs, and provided support for the implementation of more application scenarios, thereby benefiting the alts within its ecosystem.
• The combination of artificial intelligence (AI) and blockchain, the development of real-world asset (RWA) tokenization, and the improvement of blockchain gaming infrastructure have brought new value narratives and application prospects to alts, providing fundamental support.

While it remains to be seen how long the "Mini Altcoin Season" will last, the positive signals released by the market indicate that investors are re-embracing risk, injecting much-needed vitality into the market.