Bitcoin attracted flows from altcoins throughout Q2 of this year. However, since the recent Ripple ruling, its market dominance has slipped — giving ground to altcoins. Now, an analyst suggests signals for a Q3 altseason are emerging.
"There are Q3 altseason signals," Gordon Grant, managing director of trading at Genesis Trading, told The Block, adding: "If you look at risk proxies that tend to guide when altcoins do well, one includes the Nasdaq, which is pushing back towards its all-time high. Altcoins do well when the Nasdaq is rising."
The U.S. tech-heavy Nasdaq index has increased 38% since the start of 2023. It is now at 14,063 points — pushing closer to its April 2021 all-time high of 15,498 points.
"Bitcoin has had a good Q2, so people want to rotate around the credit and risk curve," Grant noted, adding: "They made good gains in Bitcoin, and now they'll move some into ether, then into risker altcoins. This is a pattern that we see."
Bitcoin dominance in decline
Bitcoin's dominance dropped under 50% after Ripple's partial legal victory against the U.S. Securities Exchange Commission. Judge Analisa Torres, who presided over the case, ruled XRP is not a security when sold on exchanges. However, the federal judge approved the SEC’s motion concerning institutional sales of XRP.
According to TradingView data, Bitcoin dominance is currently 49.83% — down from a high of 52% on June 29 and taking a sheer drop on charts immediately after the Ripple ruling on July 12.
The world's largest digital asset by market cap had marched over the 50% dominance line amid several applications for spot Bitcoin ETFs from major financial firms. The digital asset's dominance hovered around 52% for weeks until the latest ruling in the Ripple vs. SEC case knocked it off its perch. After the ruling, XRP jumped 73% to become the fourth-largest crypto asset. Other altcoins — like Ethereum, Cardano, Solana, Polygon, and Stellar — also saw double-digit growth.
'Altcoin season may have started'
A recent CryptoQuant report shared with The Block claimed this dip in Bitcoin's market dominance signals a potential onset of altcoin season. However, despite XRP's favorable ruling, the derivative markets still reflect a negative sentiment among traders.
"The decline in Bitcoin’s market capitalization dominance suggests that altcoin season may have started," the report claims, adding: "However, from the perspective of derivative markets, it appears that traders still have a negative sentiment in spite of XRP’s ruling.
'This can only be positive for true community memecoins'
A quarterly report from cryptocurrency data aggregator CoinGecko highlighted the gains made by various memecoins in May 2023. Pepe came out on top, with 1813x peak returns. It then reached a $1.8 billion market cap after its Binance listing. However, since then, the memecoin is down 65% from its early-May high.
One analyst suggested the XRP ruling could instigate another memecoin rally. "If the sale of XRP, a token issued by a centralized entity on an open market, does not constitute the sale of a security, then this can only be positive for true community memecoins." Hugh Eggar, web3 consultant at The Egg Consultancy, told The Block. Eggar believes memecoin value is chiefly determined by the strength of the communities that rally behind them rather than the efforts of a centralized team.
As altcoin trading volumes rise, he expects memecoins to see some of that capital flow, despite their high-risk nature. "If volume in alts really does begin picking up, it is likely — as always — that those taking profit will roll some of their capital gains into assets further down the risk curve," he stated.
Gordon Grant suggested a memecoin rally could follow a rise in altcoins but that there would be a lag. "As long as there is liquidity in the crypto ecosystem, memes always have that potential, but they take time to manifest those gains," Grant added.
Eggar isn't optimistic about a sudden resurgence of once-popular memecoins, citing lingering negative sentiment and burdened investors as deterrents. "The vast majority of these coins will fail before getting above even $1 million market cap as the sector is rife with a lack of transparency, greedy devs, and traders with bear market PTSD," he cautioned.
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