Digital assets saw heavy outflows last week as a bearish market sentiment grapples the crypto world. With Bitcoin and Ethereum losing out on investors, the market focus has now shifted towards altcoins that provide a better return on investment.
Bitcoin, Ethereum Mark Heavy Outflows
According to a report by CoinShares, for the second week in a row, outflows from digital asset investment products were US$584 million, deducting US$1.2 billion. The phenomenon is a response to investors' pessimism about the Federal Reserve's intention to decrease interest rates this year.
The main emphasis for the outflow trend was Bitcoin, which saw outflows of US$630 million; nevertheless, due to recent unfavorable sentiment, investors have not added to their short holdings. US$98 million in inflows into multi-asset products indicate that investors perceived the dip in the altcoin market as a chance to purchase.
Outflows for the second biggest cryptocurrency by market cap, Ethereum stood at US$58 million, according to the same report.
Why Is Altcoin Season Approaching?
Since the early days of Bitcoin, when there were just a few different types of digital assets, the meaning of an altcoin has changed. Anything other than Bitcoin (BTC) was regarded as an altcoin back then. The realm of cryptocurrency assets is far larger now. They aren't strictly rivals to Bitcoin because there is a large range of coins and tokens with uses far beyond a means of trade.
At present, many other coins like BNB, SOL, ADA, etc. stand a good chance of gathering investor attention, especially from those who are willing to invest in upcoming digital assets.
A rise in the demand for altcoins could trigger an "Altcoin season" in the near future. Altcoin season is a period in the cryptocurrency market when these alternative cryptocurrencies experience a sharp increase in value, frequently outperforming Bitcoin.
This rise may be attributed to various factors, such as increased investor interest in altcoins, the emergence of innovative altcoin projects, or an all-around positive market sentiment alongside bearish trading of Bitcoin.
With the current situation prevailing, a new altcoin season can likely take place. A good example of this can be seen from late 2017 to early 2018. The dominance of Bitcoin during this altcoin season cycle began the year at 87% and fell to an all-time low of 32% during the altcoin bubble peak in January 2018. However, altcoin dominance increased dramatically as Bitcoin dominance decreased, pointing to a sharp increase in altcoin valuations.
Several altcoins reached all-time highs, and the overall market capitalization of cryptocurrencies surged dramatically from about $30 billion in early 2017 to over $600 billion a year later. During this time, there was a surge in initial coin offerings (ICOs), with many new tokens being introduced and garnering substantial investment and speculation.
