The crypto market is starting to show early indications of this a new altcoin season could be on the horizon as analysts point to historical patterns and technical signals pointing to a recovery from a prolonged slump. Although altcoins have lagged Bitcoin of late, bullish factors from data and macroeconomic parallels are creating optimism that a change in liquidity conditions could trigger a strong market-wide rally for altcoins.
Altcoin Dominance Reaches Record Oversold Levels
According to crypto analyst Javon Marks, altcoin dominance has entered oversold conditions for the first time in history. Marks highlighted in his post that the indicator, which measures the market share of all altcoins, is now the most oversold ever.
The OTHERS.D chart shows the market dominance percentage of all but the top 10 cryptocurrencies by market capitalization. It is a benchmark for the combined market share of smaller altcoins and can be used to identify broader altcoin rallies. His long-term chart of the OTHRS.D movement spans over a decade, with each major low followed by a longer recovery period and huge market gains.
The chart shows that dominance has declined sharply since the peak of around 20% in 2021. At the time of writing, OTHERS.D’s dominance is around 7%. A wave trend indicator at the bottom of the chart is in deep negative territory, around minus 50%, the lowest in history.
Marks noted that such oversold conditions often precede strong reversals. It means that the selling pressure has been exhausted and a major recovery could begin soon. If this pattern repeats, altcoins could enter one of their most attractive accumulation phases in years.
Crypto Total Market Capitalization Excluding Top 10 Dominance. Source: Javon Marks on X
The Fed’s monetary shifts and their impact on cryptocurrency liquidity
A different technical perspective came from analyst Ted Pillowswhich compared current market conditions to the 2019-2020 cycle, when the Federal Reserve ended quantitative tightening (QT) and later resumed quantitative easing (QE). His graph of the total market capitalization of cryptocurrencies excluding Bitcoin shows a decrease of 42% following the end of QT in late 2019, followed by an explosive recovery after the Fed initiated QE in March 2020.
Pillows explained that while ending QT may ease financial pressure, it will not directly inject liquidity into the economy, something altcoins need to recover. In contrast, QE or Treasury General Account (TGA) releases flood the market with liquidity and enable inflows into cryptocurrencies.
He noted that ending QT is not enough for alts to rise. It’s either the Fed starting another quantitative easing, or the Treasury Department releasing TGA liquidity into the economy. The most viable option at the moment is the second.
Crypto Total Market Capitalization Excluding BTC. Source: Ted Pillows On
With the US government currently in a shutdownHe suggested that a TGA-driven liquidity release could occur once the budget impasse is resolved, and this will serve as the next major driving force for the altcoin market.
Featured image created with Dall.E, chart from Tradingview.com