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| By Bruce Ng |
Last week, I explained the conditions that would need to be satisfied for altseason to occur. At the time, two of the three had been met.
But alas, it didn’t come to be; Bitcoin (BTC, “A-”) spoiled the party. It dipped below $30,000 and is now teetering around $27,000, causing Ethereum (ETH, “B”) and the altcoins to dip in tandem.
However, Bitcoin’s dominance is still hovering around the 47% mark. Bitcoin’s price dropping — while its dominance remains the same — means that all other altcoins have dropped as well.
This is why altseason is now postponed … for the time being.
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Now let’s check ETH/BTC to measure the relative strength of alts to BTC.
Click here to see full-sized image.
As I explained last week, ETH/BTC is the ratio of ETH’s price to BTC’s price.
When it increases, ETH outperforms BTC. When it decreases, ETH underperforms BTC. This allows us to determine if funds will flow into altcoins.
Right now, this is looking quite unlikely.
You can see in the image above that ETH/BTC established a lower high compared to the previous high and then dipped. This represents the lack of strength in ETH … and in the alts.
However, BTC dominance and ETH/BTC are lagging indicators. They only tell the story after the fact. To be more predictive and gauge when funds will flow into altcoins, we need a leading indicator that is causative rather than correlative.
One such indicator is stablecoin borrowing on Aave (AAVE, “B”) and Compound (COMP, “D+”), two of the biggest lending platforms in crypto.
Whales — big-foot investors who typically own $10 million in crypto or more — deposit BTC and ETH into Aave and Compound then borrow stablecoins like USD Coin (USDC) or Tether (USDT) on those deposits.
Once borrowed, these stablecoins get sent to centralized exchanges or decentralized exchanges and are used to buy riskier cryptos ... like altcoins.
There are three important takeaways from this:
1. Whales who own more than $10 million in crypto are typically bullish to alts.
2. These whales are long-term crypto holders and considered veterans, as they own a lot of BTC and ETH.
3. The stablecoin amounts they borrow represent how much risk they are willing to take with respect to higher-risk cryptos like altcoins.
Now, consider the stablecoin borrowing over the past three years, as shown below.
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The price of ETH is marked in orange, and the amount borrowed in stablecoins is marked in gray.
Note the four peaks of stablecoin borrowing over the past three years, marked above by yellow circles. These occurred in March and July 2021, November 2022 and March 2023.
Each time stablecoin borrowing spiked, ETH’s price increased over the following few months.
Right now, stablecoin borrowing is on a downturn, nearing an all-time low. That combined with the other factors means I am not expecting any increase in ETH and altcoin prices anytime soon.
Due to the recent market action, all attention is on Bitcoin now. If the market leader drops further, we will need to look to the $25,000–$26,000 range for strong support.
Nevertheless, when alts dip, they present an opportunity to load up on discounted alts with strong fundamentals to hold for the long term.
That’s why I will continue to watch all three indicators to try to give you as much notice as possible for when altseason will return.
After all, you will want to prepare yourself beforehand.
How you prepare will depend on a few things, and it will be different for every investor.
I urge you to use the free tools available on our Weiss Ratings website — like our crypto ratings — to see which altcoins are currently ranked highest. You can also set price alerts for your favorite coins to let you know if they start moving.
If you are looking for more hands-on tools, I recommend checking out my colleague Juan Villaverde’s Weiss Crypto Investor service. In it, Juan uses his Crypto Timing Model and the Weiss ratings to send members “buy” and “sell” alerts on the most promising crypto assets and crypto-leveraged stocks.
In fact, Juan just recorded a video in which he breaks down the cycles the Crypto Timing Model tracks, as well as which cryptos he and Weiss founder Dr. Martin Weiss believe will outperform this cycle.
I suggest you watch it before it’s taken offline.
And of course, keep checking in here for market updates as we trace the journey to the next altseason.
Best,
Bruce Ng
