So far, the average altcoin holders appear to have massive profits, as Santiment, a leading blockchain analytics firm, reported. According to the firm’s observations, many altcoin wallets have experienced substantial gains, with most crypto projects exhibiting bullish performances.
These realized gains began ever since the market turned bullish in mid-October 2023, according to Santiment, indicating that these massive profits accumulated on a “mid to long-term timescale.”
Potential Risk Observed
Despite these gains, Santiment has issued a cautionary note to investors, signaling “overbought” levels in the market. The blockchain analytics firm noted:
Outside of a few lagging altcoins, the vast majority of crypto projects have generated profits for the average wallet on a mid to long term timescale. This means that our model is indicating a fair bit of ‘overbought’ signals.
Though Santiment revealed that this does not necessarily imply an imminent market correction, historical data indicates a higher risk of opening new positions in such circumstances.
Notably, the firm’s analysis suggests that altcoins experiencing a 4+ month rally are particularly susceptible to heightened risk, as indicated by elevated MVRV levels.
🧮 Based on average trading returns, many assets have seen understandably high profits since markets began booming all the way back in mid-October, 2023. Outside of a few lagging #altcoins, the vast majority of #crypto projects have generated profits for the average
(Cont) 👇 pic.twitter.com/ziKhzmcz1v
— Santiment (@santimentfeed) February 20, 2024
For context, the Market Value to Realized Value, also known as the MVRV metric, is a crucial tool for assessing risk in the crypto market. This metric compares the current market price of a cryptocurrency to the average price at which it was last transacted on the blockchain.
A high MVRV ratio indicates that a significant portion of the market is profitable, potentially signaling overvaluation and increased risk of a market correction.
Anticipating Altcoin Season
Meanwhile, amid discussions of altcoin performance, crypto analyst Dan Gambardello has put forth insights regarding the potential for a “blast off” altcoin season. Gambardello suggests that Cardano (ADA) and Ethereum (ETH) could spearhead such a season, provided that Bitcoin (BTC) dominance begins to decline.
Drawing from previous market cycles, Gambardello highlights the historical patterns where ADA and ETH have led the charge before other altcoins joined the upward trend.
ALTCOIN Season Signal Pending! CARDANO & ETHEREUM About To BLASTOFF!https://t.co/RvMYQgRAl1
— Dan Gambardello (@cryptorecruitr) February 20, 2024
Gambardello emphasizes the importance of monitoring Bitcoin’s dominance in assessing the likelihood of an altcoin season. While altcoins like ADA and ETH may exhibit promising signs, Bitcoin’s dominance remains a crucial factor influencing market dynamics.
Meanwhile, the altcoin market cap has marginally retraced from its recent peak above $900 billion, currently hovering slightly below this mark.
Featured image from Unplash, Chart from TradingView