Expect a ‘massive altcoin season’ once bitcoin dominance hits 65%

We’ve asked ourselves one question over and over again: Wen altcoin szn?

To be fair, David’s done a very good job of setting up what it would take to see the next altcoin season take off. But to get some clarity on how bullish folks should be, I turned to HashKey’s Jupiter Zheng. 

Zheng and David see eye-to-eye when it comes to when we could see the next altcoin season, with HashKey putting together a report on why the team is so bullish on altcoins right now. 

Part of it is the potential for bitcoin’s dominance to peak, which — if you’re a regular Empire reader — you know is one of the necessary ingredients for altcoins to take off. 

Once we get that bitcoin dominance over 60% or even 65%, that’s when Zheng expects a “massive altcoin season” to begin. BTC dominance is currently sitting at 61.64%.

Zheng highlighted three success areas he’s watching: Ethereum, Solana and certain tokens in DeFi, such as UNI and SKY (formerly MKR). 

Let’s start with Ethereum, especially because it feels like more and more people are dropping off the bull train right now. 

There are three factors bringing down Ethereum, HashKey argued: Increased competition (duh), value diversion and lower transaction fees. 

A look at past altcoin seasons courtesy of HashKey

“Currently, the Ethereum community is developing metrics to measure ‘Ethereum alignment,’ and it is anticipated that best practices will emerge from these efforts, further consolidating Ethereum’s ecosystem and ensuring long-term success,” the report stated.

As for Solana, it’s a “major fundamental play,” unlike Ethereum’s role as the “distressed play.”

“Solana has been achieving a lot of things this year, and — compared to Ethereum — Solana is a little bit centralized, but it’s very efficient. So, Solana is strong in its operational capabilities. Ethereum is more focused on the tech …  technical layers and decentralized layers and security layers, but Solana is more focused on how to deliver mass adoption,” Zheng explained to me.

And to add to that, Zheng believes it’ll be the next coin to be selected for an ETF following the ETH and BTC funds.

To round it out, “many DeFi projects from the last cycle have gradually become foundational infrastructure and have crossed cycles, forming a ‘must-have’ landscape,” HashKey wrote. 

But it’s not all bulls and daydreams, there are a few things that Zheng’s not feeling so optimistic about. 

Layer-2s for example. There can only be so many that investors can focus on. And, even beyond that, only the “top 5 or top 10 will be valuable,” he explained. 

To solve this, he has a suggestion: “If we try to select the best layer-2s from the 100 [on offer], It’s quite hard, so maybe just pick the top ones, just like we picked the Magnificent Seven from the US stock market.”

Who wants to pick the name?

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.