What If Altcoin Season Never Comes? Analyst Warns It’s Possible

Bitcoin, Ethereum ETF Inflows 2024. Source: X/Duo Nine

The negative flows for Ethereum ETFs come amid ongoing Grayscale customer redemptions following the conversion of its trust to ETFs. Before the approval of spot ETFs, the Grayscale Bitcoin Trust (GBTC) was allowing investors to redeem shares for value in US dollars. Now, with BTC and ETH ETFs available, customers are opting to redeem their shares by selling Bitcoin and Ethereum, contributing to the negative flows.

Per the analyst, while Grayscale’s customers sold $2.3 billion in ETH since July, ETF buy pressure has not been enough to offset this sell-off. Duo Nine sees no difference for an altcoin season if a Solana ETF launches.

However, it’s important to recognize that the ETH ETF market is still in its early stages. Given this context, it’s crucial to understand that while the short-term outlook for spot Ethereum ETFs may be bearish, the mid- and long-term prospects remain bullish.

In hindsight, it took some time before Bitcoin rallied following spot BTC ETF launches on January 11. The pioneer crypto chopped horizontally for slightly over a month before extending north.

“The reason that investor buying of the new Bitcoin ETFs isn’t pushing up the price of Bitcoin is that the outflows from GBTC plus selling of BTC exceed the combined inflows into all of the other ten Bitcoin ETFs. Once the initial ETF demand wanes, I expect a bigger price drop,” economist Peter Schiff said at the time.

Since the launch of Ethereum ETFs on July 23, barely a month has passed, leaving ETH with ample time for price discovery. Once Grayscale customer redemptions ease, ETH ETF flows could stabilize in the positive, with capital inflows into Ethereum rotating into altcoins.

Bitcoin Dominance Breakout

The analyst also bases his ‘no altcoin season’ thesis on the breakout seen in the Bitcoin dominance chart. This means BTC outperforms altcoins, suggesting a lack of confidence in the latter. Based on CoinGecko data, BTC dominance currently sits at 53.8%.

This turnout is likely ascribed to prevailing market uncertainty amid global geopolitical tension, political frenzy in the US, and recession fears, among other volatility-inducing narratives. These prompt investors to rally behind Bitcoin, a flight to safety, as BTC is considered a better haven than altcoins.

Nevertheless, some investors view high Bitcoin dominance as an opportunity to accumulate altcoins at lower prices. When Bitcoin’s dominance is high, altcoins may be undervalued relative to Bitcoin, presenting a buying opportunity for those who believe in the long-term potential of specific altcoins.