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Altcoins have faced significant challenges over the first eight months of 2024, but there are signs that a major recovery could be on the horizon.
{Ethereum} (ETH) has struggled recently, trading at its lowest price against Bitcoin (BTC) in nearly three years. Despite multiple upgrades and the introduction of Ethereum ETFs, the cryptocurrency has not gained significant momentum. This downturn has contributed to broader market weakness.
However, there are indicators that this might be a temporary phase. Historically, the performance of altcoins often follows seasonal trends. For instance, Chainlink (LINK) has consistently shown a pattern of underperformance in the first half of the year, only to rebound sharply in the latter half. In 2022, 2023, and 2024, Chainlink lost over 60% of its value in the first half of the year, yet it surged by more than 120% during the second half in previous years.
Another factor affecting the altcoin market is Chinese liquidity. Historically, Chinese liquidity injections follow a six-month cycle, impacting the altcoin market’s performance. The last expansion began in September 2023 and peaked in February, aligning with past altcoin peaks.
Global liquidity currently remains weak, but there are signs that this could improve. China and the Federal Reserve are expected to implement quantitative easing, which might foster a more favorable environment for altcoins. The Fed’s planned rate cuts could further bolster market conditions.
Altcoins are currently testing old price levels, which suggests they are in a similar phase as previous market cycles. Although the market capitalization of altcoins is down 50% from its all-time high in 2021, there are signs of strong bullish divergence and solid support levels.
For example, AAVE (AAVE) has a market capitalization of around $1.8 billion as of early September 2024, despite having approximately $12 billion in value locked within its ecosystem. This suggests it is undervalued relative to its potential and revenue-generating capabilities.
In summary, while the altcoin market has faced a rough year, various indicators suggest it might be poised for a significant upswing.
