Assessment from on-chain data: When will the new round of copycat season start?

Author: Murphy, on-chain data analyst

On-chain data evaluation model—Copycat Season

One day I was in class, and Mr. Xiao Chi @FC_0X0 sent me a WeChat message saying: "There is a data, which is the scissor difference between the total inflow of stablecoins into exchanges and the USD value of BTC withdrawn, that is, the remaining potential purchasing power and the value of altcoins. There may be a direct relationship with fluctuations. Can we use this logic to look at the timing of the launch of altcoins?”

By coincidence, my courseware also mentioned data observations on potential conditions for "fund overflow", which happened to correspond to the launch time nodes of some large-capitalization altcoins. But at that time it was just a rough outline, and I seemed to vaguely think of some places that had been missed before...

After I came back, I sorted out the data, and based on the ideas given to me by Mr. Xiaochi, I re-conceived a set of visual indicators that can effectively judge the "copycat season". Let me share my thoughts below:

Copycat Season Condition 1: Assessment of Fund Overflow Conditions

(Figure 1)

The green color in Figure 1 indicates whether the total size of stablecoins flowing into the exchange within 30 days is greater than the USD value of BTC being withdrawn from the exchange. If so, it means that in addition to buying BTC, these funds may also overflow into altcoins. The higher the green signal column, the greater the theoretical overflow value, and the more prerequisites are available for the start of the copycat season.

From the data point of view, the theoretical overflow value is the largest during the two periods of 2023.10-2024.3 and 2024.11-2024.12, which means that the possibility of a "copycat season" is higher during these two periods. There is also a short period between August and September, but it is inferior to the above two periods in terms of scale and duration, so its influence is relatively weak.

Copycat Season Condition 2: Capital inflow from mainstream assets

(Figure 2)

Historically, BTC often leads the overall sentiment of the crypto market first, and then market confidence will flow to other large-capitalization mainstream coins, and finally tilt further towards ALT. A tool to visualize this capital rotation is to use the realized market cap of BTC and ETH and the 30-day change in the total supply of stablecoins (Figure 2). When these three major mainstream assets all experience net capital inflows, it is deemed that market sentiment has become excited and the overall risk appetite has increased. This is also one of the necessary macro conditions for starting the copycat season.

Judging from the data, the three major mainstream assets experienced net capital inflows at the same time during the two periods of 2023.10-2024.8 and 2024.10-2024.12, reaching their peaks in March and December 2024. This is also the time when market sentiment is the most FOMO so far in this cycle.

Alteration Season Judgment 3: Positive Momentum of Altcoin Market Cap

Dispersion

(Figure 3)

The data basis for judging the start of the altcoin season also requires a third condition, which is to isolate positive momentum in the dispersion of the total market value of altcoins. We need to look for the time period when the total valuation of the altcoin’s 7D SMA within the range is greater than its total 30D SMA valuation. Because, this can represent that the valuation of altcoins is amplifying in the short term, and the liquidity flowing into altcoins is increasing rapidly .

In Figure 3, red is the 7D mean and blue is the 30D mean; from the data point of view, the red line crosses the blue line during the two periods of 2023.10-2024.4 and 2024.11-2024.12, which means that the liquidity of the currency circle begins to tilt like an altcoin. Altcoin market capitalization is shifting to a positive momentum growth phase.

Summarize

The above three conditions are considered from different perspectives. Condition 1 represents the possibility of capital overflow; condition 2 represents overall sentiment and risk preference; condition 3 represents liquidity tilt. When both are satisfied, there is a high probability that a copycat machine is coming.

The current condition 2 is met, but 1 and 3 are not met ; then we can think that there is a foundation for starting the alt season, but liquidity is still concentrated on mainstream assets (especially BTC), and there is not much overflow of funds on the market. to altcoins.

However, we can also see that the "negative overflow" in condition 1 is slowly shrinking, which is a positive signal. Although the copycat season that friends are looking forward to may have to wait patiently, what should come will come.

The content shared in this article is for communication and research only and is not intended as investment advice.