Following the recent rise in altcoin prices, discussions about the potential start of an altseason are gaining considerable momentum. Interestingly, recent on-chain data on increasing altcoin trading volume has added weight to discussions about the altseason.
Altcoin Trading Volume Climbs Above Annual Average
In a recent Quicktake article on the CryptoQuant platform, CryptoOnchain revealed 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 the volume of transactions 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 turnover and the extent to which altcoins have started to strengthen.
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According to CryptoOnchain, the 30-day moving average of altcoin trading volume has now exceeded its 365-day moving average. This trend, explains the analyst, shows that the volume of this sub-asset class is constantly increasing.
Higher values in the CEX:Other volume ratio compared to the Top 5 are telltale signs that traders are moving toward smaller altcoins rather than the major cryptocurrencies (Bitcoin, Ethereum, Solana, XRP, and BNB). This, in turn, is interpreted as a growing appetite for risk, which could positively influence an altcoin rally.
The market analyst cited historical data, noting that instances where signals flashed primarily reflected short-term volume growth relative to the long-term benchmark. These cases also signaled “a clear rotation of capital from large caps into mid- and small-cap altcoins.”
For example, during the 2021 bull cycle, repeated clusters of these signals coincided with explosive rallies in the altcoin sector, alongside significant Ethereum price appreciation.
Notably, the chart shared by CryptoOnchain shows that the purple “Volume Ratio” line is gradually strengthening 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.
Ethereum Stability Could Confirm Impending Altcoin Rally
CryptoOnchain further explained that the reinvigoration of altcoin trading volume could be a sign that “individual and institutional interest is expanding beyond the top 5 assets.” However, this does not necessarily translate into bullish news for the altcoin market.
According to the crypto expert, confirmation of Ethereum’s price action could be necessary to determine the internal dynamics of the market.
CryptoOnchain explained:
If this momentum continues and is 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 Ethereum price stands at $2,329, up 1% in the last 24 hours, according to CoinGecko data.
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Featured image from Shutterstock, chart from TradingView
