After the recent rise in altcoin prices, talks about the possible start of an altseason are gaining significant momentum. Interestingly, recent on-chain data about rising altcoin trading volume has added some weight to the altseason discussions.
Altcoin trading volume is rising above the annual average
In a recent Quicktake post on the CryptoQuant platform, CryptoOnchain revealed a crucial change in the altcoin market. Citing the ‘CEX Volume Ratio: Others vs Top 5’ metric, the market analyst explained that altcoin trading volume has been on an upward trend lately.
The metric “CEX Volume Ratio: Others vs Top 5” tracks how much trading volume flows into altcoins outside the top 5, relative to the combined volume of the top 5 assets. As such, it plays a key role in identifying the extent of capital rotation and whether altcoins start to gain momentum.
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According to CryptoOnchain, the 30-day moving average of altcoin trading volume has now risen past the 365-day moving average. This trend, the analyst explained, shows that the volume of this sub-asset class is steadily increasing.
Higher values in the CEX Volume Ratio: Other vs Top 5 are telltale signs that traders are leaning towards smaller altcoins rather than major cryptocurrencies (Bitcoin, Ethereum, Solana, XRP and BNB). This in turn is interpreted as growing risk appetite, which could positively impact an altcoin rally.
Citing historical data, the market analyst noted that instances where the signals flashed mainly reflected short-term volume growth relative to the long-term baseline. These cases have also signaled a “clear rotation of capital from major caps to mid- and low-cap altcoins.”
For example, during the 2021 bull cycle, repeated clusters of these signals coincided with explosive rallies in the altcoins sector, in addition to a major price increase in Ethereum.
Notably, the chart shared by CryptoOnchain shows the purple ‘Volume Ratio’ line gradually strengthening again after a period of weakness. The analyst noted that a breakout in the ratio could precede periods of high volatility, potentially increasing the chances of an altcoin market rally.
Ethereum Stability May Confirm the Impending Altcoin Rally
CryptoOnchain further explained that the revival of altcoin trading volume could be a sign that “retail and institutional interest is expanding beyond the top 5 assets.” However, this does not necessarily translate into bullish news for the altcoin market.
According to the crypto expert, confirmation of Ethereum’s price action could be needed to determine the inner dynamics of the market.
CryptoOnchain explained:
If this momentum continues and is accompanied by a stable or rising ETH price, it could serve as strong confirmation that a broader altcoin rally is underway.
At the time of writing, the Ethereum price is at $2,329, up 1% in the past 24 hours, according to CoinGecko data.
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Featured image from Shutterstock, chart from TradingView