Altseason speculation heats up as altcoin market cap nears May 2021 levels (Bitfinex)

While market dynamics signal the start of an altcoin season, Bitfinex believes that any major correction in bitcoin’s price would be magnified in these assets.

Over the past three weeks, the Total3 index, which refers to the market capitalization of cryptocurrencies excluding bitcoin (BTC) and ether (ETH), has rallied to levels not seen in three years, indicating the potential start of an altcoin season.

According to the Bitfinex Alpha weekly report, there is significant strength and momentum in the broader altcoin market, as seen with many cryptocurrencies hitting cycle highs and large-cap assets like Solana (SOL) reaching new all-time highs .

The beginning of the Altseason

Altcoin season refers to a period when capital leaves BTC and flows into altcoins, causing cryptocurrencies to outperform the leading digital asset for relevant periods of time. At this time, the market often reflects a growing investor appetite for altcoins and positive market sentiment among traders.

Last week, the Total3 index hit new cycle highs, posting its biggest move since April 2021 with a 23.2% increase. The total market capitalization of these crypto assets approached the May 2021 collective high of $984 billion. Bitfinex said this increase is likely driven by ongoing developments in the regulatory landscape.

“We broke the April 2022 high for altcoins, which was widely regarded as the ‘beginning of the bear market’, after which the next downward push formed the 2022 bear market lows for altcoins. We believe a rise beyond these levels indicates a shift of speculative capital and interest from Bitcoin to altcoins as retail market participation increases,” the report states.

In particular, higher funding rates for large-cap altcoins are a signal for investors to exercise caution during trading as these assets could experience minor corrections in the coming days. Bitfinex said the market has already seen hundreds of millions of dollars in daily liquidations over the past week for both short and long positions.

How is Bitcoin Faring?

While altcoins are preparing for their rally, BTC is struggling to hold above $93,000 as investors take profits. The cryptocurrency was worth $93,550 at the time of writing, down 3.5% on the day after flirting with $100,000 for the past week.

Bitfinex warned that a bigger BTC correction in altcoins could build, although the high season is expected to continue.

Meanwhile, Bitcoin is now the seventh largest traded asset by market capitalization, and its quarterly performance has outperformed that of gold and silver.

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