Alt Season Gains Momentum - Is it Early?

Alt Season Gains Momentum - Is it Early?

Disclaimer: Your capital is at risk. This is not investment advice.

ByteFolio Issue 87;

This issue covers Bitcoin (BTC), ByteTree Crypto Average (BCA), Solana (SOL), and Avalanche (AVAX).

The MVDA Crypto Index dates back to 2015 and does a good job of reflecting the market’s progress. Back then, bitcoin made up 80% of the market, and today, it is still a highly impressive 52%. Naturally, it was 100% in 2009 when crypto began. Then came Litecoin (LTC), then the onslaught.

I plot the MVDA against bitcoin, and the returns appear to be similar, which is no great surprise since the index is 59% bitcoin and was once 80%. The difference is therefore a mix of the change in dominance (bitcoin weight in the index) and the performance of alts.

Bitcoin versus the Market

Source: Bloomberg

The lower blue line shows the relative performance, or in crypto speak, MVDA in Bitcoin. There have been two great alt rallies, in 2017 and 2021, where altcoins gained much more than bitcoin (2x or more). Given that alts are modest in the index, it implies they beat bitcoin by much more than 2x. The entire raison d'être for ByteFolio was to identify the leading altcoins that could beat bitcoin over time. It isn’t easy, but when the alt season arrives, you simply want to own a basket of decent tokens and strap in.

I am intrigued by how the blue line (alts in BTC) has mean reverted around the average line (red dash), which sits at 100 since 2015, the same as the start level. The price has recently turned up from the low at the end of 2020. It looks and feels to be bullish for alts.

Yet the past two alt seasons both appeared the year after halving when bitcoin had already surged. Alts carried on as bitcoin stalled. Halving comes around next April, so perhaps it isn’t until 2025 that we should expect a strong alt season, but our ByteTree Crypto Average (BCA) is finally back to 5 stars, and that tells us the overall market is strong.

ByteTree Crypto Average (BCA)

Source: ByteTrend

That should give us confidence that alts are going up, which means we should own them. But despite most tokens being in uptrends, we still haven’t seen the surge (blue) in alts beating bitcoin. It’ll come, and expect ByteFolio to surge when it does.

Crypto Breadth

Source: ByteTrend