Will Markets Gift us an Altseason?

Let me set the record straight… I still have longs.

I began publishing crypto content because I was tired of watching crypto influencers exploit their audience with narrowly researched hopium for the sole purpose of packing their own pockets. I know there are investors who have walked away wealthy, but all-in-all, only 8% - 15% of crypto investors make money. My goal is to give my audience deeper, more honest research to buck this trend. I hope you value this approach.

Even though my project research content does much better, I would feel like I am lying by omission if I did not share my macro market research. I have found two things over my 15 years of investing:

1. I am pretty good at identifying broad market trends (and trade them)

2. I have been profitable in every crypto cycle 🤞

Signs of an Altseason

If you read my market top content, you might be surprised to hear that there is a strong case for an altseason in the model. In fact, when you look at market behavior ‘late-cycle’, we have seen up to 3 months of bullish markets after Fed rate cuts begin. If you watched my market top video, you know we’re either just exiting the pre-market crash, or double topping. The S&P is fighting ATHs, we are at a pivotal time in markets.

I still hold longs for the altseason scenario, but if you look at the state of economy, the downside risks are stacking up in the medium to long term. In the short term, we could still get what we’ve been waiting for… an altseason!

Dial up an Altseason, Please 🤞 

Last week we had an exciting altcoin breakout! The ‘Others’ chart (all cryptos outside of the top 10) just broke out of it’s downtrend. Alts are now facing a sea of resistance, the first at ~$210 billion. If we break through this, Steve Irwin would wrestle this chart, hold it up and call it a “beauty”… if he was still around.

At most recent lows, alts were down 50% off our highs in March, which is not unprecedented. In December 2017 alts corrected ~45% before rocketing 300% to all time highs in January 2018. Crypto markets can move quickly. Despair-to-ATHs in exactly a month, one more time please!

Altseasons are Fast

Altseasons occur very quickly, and can easily fit a brief rally at the end of broader market top. In 2017, the largest moves in altcoins took just about a month, in 2021 2.5 months and in 2022 it spanned 1.5 months.

Stochastic RSI Strength

On Sunday, we confirmed another harbinger for alts… the weekly Stochastic RSI. As of writing, the weekly SRSI is showing huge momentum. This is the kick in the butt alts need and I will be watching it closely.

Lack of Bearish Divergence

Another reason I’ve been hopeful for an altseason is the lack of bearish divergence on the RSI. Bearish divergence on the RSI is when you see higher highs in price or market cap, but lower lows on the RSI. This is a strong signal momentum is leaving the asset, and a downtrend is around the corner. Side note: the S&P 500 is showing bearish divergence on the monthly, weekly and daily charts, ominous 😬.

Bearish divergence is very common at the tops of rallies in altcoins, we often see it. On the ‘Others’ chart, we saw bearish divergence on the daily chart in 2017, and very briefly saw it at it’s highs in March 2024. If you want to know how I factor in RSI to time altcoin exits, sign up as a YouTube member to watch my exit strategy video. Link at the bottom of the email.

Last Hope Rallies

A month long rally fits well in the late cycle rally timelines. In 2007, markets rallied for 3 months after the first Fed rate cuts on hopes rate cuts would turn the economy around quickly. That means a 30 - 60 day rally is not out of the question. We will have to wait a week or two to find out the strength in this current rally.

Altseason Headwinds

With all of that great news, is an altseason “programmed”? After all, ever since the first altcoins were created, an alt season has occurred in each cycle. I like our chances, however, if there is one thing markets like to do, it is surprise investors.

Investing is like walking to your table in the high school lunch room. You are carrying your lunch tray, minding your own business when the class bully sneaks up behind you and pulls your pants down, because he can. The bully is the market. And what you need are friends (we’re all friends here) to tell you “hey, turn around the bully is coming.” Once face-to-face with the bully, he may walk away or he may still try for your pants, either way you’re prepared to minimize the damage.

The Psychology of the Battered Consumer

Despite all the talk of institutional investors getting into crypto, retail investors drive the market. Smart, institutional money likes to trap retail money, but if consumer money is dried up, there is no reason to set the bait. I’m not saying this will be the outcome, just that we need to be on our toes, because this time has the potential to be different.

In the mind consumers, they are paying more for groceries, insurance and housing due to higher inflation, all while trying to maintain their lifestyles. This has lead to higher credit card balances and larger interest payments. Add in an increase of ~1% of workers being unemployed, reduced hours, and you can understand why retail is feeling more pain today. Making high risk bets on super risky altcoins is probably scary for some cash strapped retail investors.

Bitcoin, Where is your ATH?

Despite increasing liquidity in crypto stablecoins, a strongly declining dollar and ATHs in stocks, Bitcoin has been surprisingly weak. It’s not unprecedented to see some BTC weakness during a risk-on rally, but BTC lead us into new stock ATHs in 2021 and that is not happening now. BTC is a leading signal of market liquidity, and with it’s struggles, I question the liquidity of retail investors. I hope stablecoin liquidity is indicating crypto is about to spring, but BTC has slipped into bear markets with rising liquidity in the past.

Conclusion - Longs with Hedges

I like lopsided bets, and this late in the cycle risks to the downside are piling up compared to fair-weather winds to the upside. This is normal for the end of bull markets and while I am still positioned to take advantage of altseason, I’ve taken some side cash and diversified. I’ll be watching closely to how markets react to catalysts this week and if we maintain this bullishness. I am hoping this recent market strength continues!

I am still long in crypto, and I am building positions that I think will do 2x-3x in a bear market. If you’re interested in learning what my trades are in real-time, become a Market Navigator member on my YouTube channel. I share updates in posts and videos about my trade and investing ideas.

*Reminder, this post is for informational purposes only, it is in no way personalized financial advice for the reader.