The Altcoin market recorded the most significant monthly recovery of the year. While most “Altcoin season” predictions focus on cryptographic metrics, one factor that is often overlooked is its correlation with US small caps.
So, what does this correlation suggest? Here are some deeper insights.
Altcoin season gets macro boost from US small caps
The Bravos Research finds that the Altcoin market shows a strong correlation with our small caps, as represented by the Russell 2000 index.
Ishares Russell 2000 is an ETF (Exchange-Traded Fund) managed by BlackRock. It is designed to track the performance of the Russell 2000 Index, representing 2,000 small businesses in the US.
Data shows that Altcoin’s market capitalization closely reflects the movement of small-caps in the US since 2019. This is because investors view both asset classes as high risk, high compensation.
Bravos Research notes in its latest video analysis that small businesses and Altcoin have not yet fully recovered. Meanwhile, investors are paying more attention to large companies and Bitcoin.
This trend reflects a narrow economic recovery. Recovery is not strong enough to drive capital into riskier assets.
“That is reflected in the behavior of crypto investors. In these moments, there is a narrow economic recovery and a stock market recovery, there is a narrow recovery in crypto markets,” reported Bravos Research.
However, the analysis also points out a recent increase in SME optimism. Currently, the SME Sentiment Index is similar to the trends in 2016, 2020 and 2021, but is hampering the economic situation from improving. If this trend continues, small-cap stocks could surge.
Combined with correlation with the crypto market, the positive sentiment of low-cap inventory may indicate that there is still room for the Altcoin season to grow.
The Altcoin market will be pulled back in early August, but emotions remain strong
The Altcoin market turned red in early August following a strong July rally. Total3’s market capitalization (excluding BTC and ETH) fell from $1.09 trillion from its July high to about $965 billion. This is a drop of nearly 12%.
However, this decline does not seem to shake up investors’ feelings. The Crypto Fear & Greed Index remains in the “greed” zone.
Furthermore, Coinvo’s Altcoin profit indicators have been rising sharply since the start of the year, reflecting new enthusiasm among retail investors.
“Retail is fully active and the Altcoin season is finally here,” Coinvo reported.
A recent report from Beincrypto highlights the advantages of Bitcoin and the slower outperformance of Ethereum against Bitcoin. Both of these are strong indicators of the ongoing Altcoin season.
The surprising US inventory correlation suggests that the Altcoin season is far from its first appearance on Beincrypto.
