A crypto analyst on Twitter expects altcoin prices to be muted in the second half of 2023. Data indicate that the fate of altcoins and the possibility of an “alt season” is highly dependent on the performance of Bitcoin.
Being the foremost cryptocurrency and market leader, according to CoinMarketCap data, Bitcoin’s impact on altcoins cannot be underestimated.
Altcoins Are In Accumulation Phase, Waiting On Bitcoin?
In his assessment, altcoins are currently in the “accumulation phase,” which has kept the sector at a market cap between $290 billion and $460 billion for the past few trading months. This trend, he forecasts, will likely continue until next year, when Bitcoin is expected to halve its block reward to 3.125 BTC.
Considering the performance of Bitcoin after past halving events, the cryptocurrency could see further profits as the event nears. This, in turn, factoring in the direct correlation between Bitcoin and altcoins, will likely trigger an “altcoin season.”
To cement his market preview, he shared a screenshot depicting the total market capitalization of altcoins excluding Bitcoin and Ethereum, revealing extended periods of sideways trading during previous bear markets. Extending from this outlook, the analyst expects altcoins’ price movements to be limited until after the halving event, as seen in the chart below.
Historically, Bitcoin surges tend to support altcoins, a trend observed in recent cycles. Altcoin’s relatively thin liquidity often leads to price gains outpacing the more liquid BTC. Conversely, whenever Bitcoin prices crash, altcoins tend to collapse faster.
Most Altcoins Are Weak?
In recent months, Bitcoin has been firm, rising 80% in H1 2023 after prices bottomed up in late 2022. On the other hand, despite the direct correlation, most altcoins remain suppressed, down from 2021 peaks.
To illustrate, coins like ADA, SOL, DOGE, ALGO, and others are down roughly 85% from 2021 peaks and remain under pressure when writing on July 10. Regulatory headwinds and generally suppressed market conditions have worsened sentiment, diffusing upside momentum.
The U.S. Securities and Exchange Commission (SEC) recently alleged that several altcoins, including SOL and ADA, are securities, a comment that saw prices dump in June.
The only outlier among altcoins is XRP. Optimism in the ongoing legal battle between Ripple and the SEC has supported the coin, forcing prices to diverge from other altcoins. Even so, the final ruling will likely significantly impact prices and volatility. Currently, XRP is trading below $0.50 but is up roughly 45% from 2022 lows and is firm, trading in a bullish formation above $0.45.
XRP will likely tear higher if a favorable ruling supports Ripple’s assertion that XRP, a coin they use in their On-Demand Liquidity (ODL) platform, is not a security but a utility like Bitcoin. A ruling in support of the SEC would trigger a sell-off, possibly unwinding recent gains.