Following the recent uptick in altcoin prices, conversations about the potential start of an altseason are gaining significant momentum. Interestingly, recent on-chain data about the rising altcoin trading volume has added some weight to the altseason discussions.
Altcoin Trading Volume Climbs Above Yearly Average
In a recent Quicktake post on the CryptoQuant platform, CryptoOnchain revealed a critical change in the altcoin market. Citing the “CEX Volume Ratio: Others vs Top 5” metric, the market analyst explained that the altcoin trading volume has been in an uptrend lately.
The “CEX Volume Ratio: Others vs Top 5” metric tracks how much trading volume is flowing into altcoins outside the top 5, relative to the combined volume of the top 5 assets. As such, it plays a key role in identifying the extent of capital rotation and whether altcoins have started to gain strength.
Related Reading
According to CryptoOnchain, the 30-day moving average of altcoin trading volume has now climbed past its 365-day moving average. This trend, explained the analyst, shows that the volume of this sub-asset class is steadily increasing.
Higher readings in the CEX Volume Ratio: Others vs. Top 5 are telltale signs that traders are leaning towards smaller altcoins rather than into major cryptocurrencies (Bitcoin, Ethereum, Solana, XRP, and BNB). This, in turn, is interpreted as growing risk appetite, which could positively influence an altcoin rally.
The market analyst cited historical data, noting that instances where the signals flashed mostly reflected short-term volume growth relative to the long-term baseline. These cases have also signaled “clear rotation of capital from major caps into mid and low-cap altcoins.”
For example, during the 2021 bull cycle, repeated clusters of these signals coincided with explosive rallies across the altcoins’ sector, alongside a major price appreciation in Ethereum.
Notably, the chart shared by CryptoOnchain shows the purple “Volume Ratio” line gradually strengthening again after a period of weakness. The analyst noted that a breakout in the ratio could precede high-volatility periods, potentially increasing the likelihood of an altcoin market rally.
Ethereum Stability Could Confirm Imminent Altcoin Rally
CryptoOnchain further explained that the reinvigoration of the altcoin trading volume could be a sign that “retail and institutional interest is expanding beyond the top 5 assets.” However, this does not necessarily translate to bullish news for the altcoin market.
According to the crypto pundit, confirmation from Ethereum’s price action might be necessary to determine the market’s inner dynamics.
CryptoOnchain explained:
If this momentum is sustained and accompanied by a stable or rising ETH price, it could serve as a strong confirmation that a broader altcoin rally is underway.
As of press time, the Ethereum price stands at $2,329, up 1% over the past 24 hours, according to CoinGecko data.
Related Reading
Featured image from Shutterstock, chart from TradingView