With Donald Trump winning the US Presidential elections, crypto investors have been very bullish in anticipation of better regulatory clarity. This coupled with record inflows into the Bitcoin ETFs has led to a significant price action in Bitcoin, currently trading at $93,300.

Historically, when Bitcoin rises, it often triggers an "Altcoin Season," where tokens excluding Bitcoin experience increased price gains and market cap growth, sometimes outpacing Bitcoin’s growth. While BTC is hitting all-time highs, the Altcoin Season Index, which tracks altcoin performance relative to Bitcoin, has dropped to 39, signalling weak momentum in altcoins. With such momentum, will we see another Altseason like the one in 2021? Let's take a closer look at it.

Declining Bitcoin Dominance

An altcoin season often begins when Bitcoin's market dominance starts to decline, signalling a shift in investor focus toward alternative tokens. Following this pattern, Bitcoin’s dominance has recently dipped from a high of 61.33% to 59.57%, even as BTC reaches new all-time highs. The total market capitalization of the crypto market excluding Bitcoin and Ethereum has surged to $837 billion, marking its highest value since early 2022. However, this figure remains over 35% below the peak in November 2021, indicating room for further upside in Altcoins. If Bitcoin stabilizes after this surge, the likelihood of capital rotating into altcoins could increase setting the stage for another Altcoin rally.

Increasing Inflows Into Ethereum and Other Largecap Coins

Another notable indicator pointing toward an upcoming altcoin season is the shift of capital from Bitcoin into large-cap altcoins. The chart below illustrates this cyclical flow of money, moving first into Bitcoin, then large-cap altcoins, and eventually into smaller-cap projects.

In the past few days, Ethereum ETFs recorded weekly inflows of around $515 million which is the highest since the approval of the ETF. We also saw Ethereum's price move up to $3,400 recently, indicating increased investor confidence in the asset. Similarly, another large-cap coin Solana also saw record weekly inflows of nearly $24 million taking up the price to over $230 – trading close to its all-time highs. BNB and others have seen increased activity and price action trading near all-time highs suggesting a shift in investor focus. Additionally, institutional investors have shifted their focus to utility-based coins channeling money into fundamentally sound coins with practical use cases, further driving up activity in Altcoins.

Heightened Activity in Emerging Themes

An Altcoin season is usually accompanied by increased activity in emerging narratives. While the theme for the previous Altcoin season was NFTs, this season, the narrative seems to be meme coins and AI coins. Currently, AI-focused and meme coins are already gaining traction, commanding 50.4% of the narrative mindshare within the crypto ecosystem, indicating heightened user engagement in these segments. The previous theme (NFTs) also saw increased activity with NFT sales going up by 94% to $179 million. NFT buyers and sellers have gone up by 251.19% and 236.89% respectively.

Even in NFT sales, the Ethereum and Solana-based NFT sales volume significantly increased as much as 130% while Bitcoin blockchain NFTs are yet to catch up suggesting higher activity in Altcoins compared to Bitcoin.

What Should Investors Do?

While the indicators suggest an upcoming Altcoin season, investors should conduct thorough research on any coin before committing capital. Macroeconomic factors like geopolitical events, economic outlook, interest rates etc need to be considered before investing. Diversification is key during an altcoin season. Given that no one can time the market, spacing your investments in a SIP format is recommended to reduce risk. A well-informed investor who takes both historical trends and current conditions into account is likely to benefit the most from this Altcoin season.