After the recent surge in altcoin prices, talk of the potential start of the offseason is gaining significant momentum. Interestingly, recent on-chain data on increasing altcoin trading volume has added some weight to pre-season discussions.
Altcoin trading volume climbs above annual average
In a recent Quicktake post on the CryptoQuant platform, CryptoOnchain discovered a critical shift in the altcoin market. Citing the “CEX Volume Ratio: Others vs Top 5” metric, the market analyst explained that altcoin trading volume has been on an upward trend lately.
The “CEX Volume Ratio: Others vs Top 5” metric tracks how much trading volume flows into altcoins outside the top 5, relative to the combined volume of the top 5 assets. As such, it plays a key role in determining the extent of capital rotation and whether altcoins have started to rally.
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According to CryptoOnchain, the 30-day moving average of altcoin trading volume has now crossed its 365-day moving average. This trend, the analyst explained, shows that the volume of this subclass of assets is constantly increasing.
Higher readings in CEX Volume Ratio: The rest of the Top 5 are telltale signs that traders are leaning towards smaller altcoins rather than major cryptocurrencies (Bitcoin, Ethereum, Solana, XRP and BNB). This, in turn, is interpreted as a growing appetite for risk, which could have a positive effect on the rise of altcoins.
The market analyst cited historical data, noting that instances where signals have flashed mostly reflect short-term volume growth relative to a long-term baseline. These cases also signaled “a clear rotation of capital from large-caps to mid- and low-cap altcoins.”
For example, during the bullish cycle of 2021, repeated groups of these signals coincided with explosive growth in the altcoin sector, with a large appreciation in the price of Ethereum.
Namely, the chart shared by CryptoOnchain shows a purple “Volume Ratio” line gradually strengthening again after a period of weakness. The analyst noted that a breakout in the ratio could precede periods of high volatility, potentially increasing the likelihood of an altcoin market rally.
The stability of Ethereum could confirm the imminent growth of Altcoins
CryptoOnchain further explained that the resurgence in 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 into positive news for the altcoin market.
According to a crypto expert, confirmation of Ethereum’s price action could be needed to determine the internal dynamics of the market.
CryptoOnchain explained:
If this momentum is sustained and accompanied by a stable or rising ETH price, it could serve as strong confirmation that a broader altcoin rally is underway.
At press time, the price of Ethereum is $2,329, up 1% in the last 24 hours, according to CoinGecko.
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Featured image from Shutterstock, chart from TradingView
