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Bitcoin (BTC) has reached a new all-time high, surpassing the $118,000 mark, igniting speculation about the potential for an upcoming altcoin season.
Analysts are now closely monitoring market trends, particularly as they relate to Ethereum (ETH) and other altcoins, to gauge whether this surge in Bitcoin will translate into broader gains across the cryptocurrency spectrum.
Altcoin Season May Still Be On Hold
Crypto analyst VirtualBacon suggests that while Bitcoin’s record-breaking price is significant, it isn’t the entire picture. Historically, Bitcoin tends to lead the market, with altcoins lagging until liquidity shifts favorably.
According to the analyst, this pattern indicates that while Bitcoin’s performance is impressive, the conditions for a full-fledged altcoin season may not yet be in place.
The 50-week simple moving average (SMA) stands at approximately $87,000, serving as a critical line for bullish sentiment. Over the past two years, any dips near the 20-week SMA have presented buying opportunities, reinforcing a bullish outlook while keeping the market structure intact.
However, the analyst warns that a genuine altcoin season requires a sustained decline in Bitcoin’s dominance. This means observing lower highs and lower lows in Bitcoin’s dominance metrics over a more extended period.
At present, the market has not demonstrated these necessary conditions. Notably, the ETH/BTC ratio is showing signs of promise, as it has established a higher low for the first time since January 2022.
If Ethereum manages to close above 0.024 BTC this week, VirtualBacon asserts that it could signal a significant breakout, a positive indicator for altcoins like Solana (SOL), which has already seen a 23% increase through automated trading strategies.
Bitcoin Resilience Fuels Optimism
Liquidity trends are another critical factor to watch. The Global Liquidity Index is forming a higher low, and a break above previous highs from April and September 2024 could signal a shift in market conditions. Until then, the market may remain in a consolidation phase.
The Federal Reserve is also making subtle moves that could impact liquidity. Recently, there was an $11 billion repo injection, coupled with a proposal to modify the Supplementary Leverage Ratio (SLR) for major banks.
These measures, while not explicitly labeled as quantitative easing, suggest an effort to expand liquidity without directly cutting interest rates. Historically, such shifts in Fed policy tend to influence cryptocurrency markets even before the mainstream financial media catches up.
The upcoming Federal Open Market Committee (FOMC) meeting on September 17 is poised to be a crucial date. Current projections indicate a 64% likelihood of an interest rate cut in the fourth quarter.
VirtualBacon noted in his analysis that should repo operations expand and the Supplementary Leverage Ratio adjustments be implemented, it could create a more conducive environment for altcoins.
To conclude, the analyst asserted that Bitcoin continues to perform well, and with Ethereum and Solana showing signs of recovery, the groundwork for an altcoin season appears to be forming. However, the full realization of this potential will require further confirmation and time.
Featured image from DALL-E, chart from TradingView.com
