Bitcoin's surge triggers alts rebound, signs of market fund rotation emerge

Recently, the cryptocurrency market has experienced a strong surge, with Bitcoin (BTC) price breaking through $123,000, setting a new historical high. In this round of growth, some established large alts have performed particularly well, with gains even surpassing Bitcoin.

Data shows that among the top 20 cryptocurrencies by market capitalization, several "veteran" Layer 1 (L1) projects have recently performed outstandingly, with a weekly increase generally reaching double digits. Among them, Stellar (XLM) leads with a 82% weekly increase, ranking 12th by market capitalization. In addition, ADA, ranked 10th, and XRP, ranked 6th, both recorded an increase of nearly 30%, while DOGE, ranked 8th by market capitalization, also rose by 18%.

It is worth noting that some emerging alts have also performed well. The L1 project Sei (SEI), which focuses on decentralized exchanges (DEX), and the synthetic dollar protocol Ethena (ENA) both saw a 7-day increase of over 30%.

A report by research firm Delphi Digital points out that the overall performance of established tokens that have experienced multiple bull and bear cycles since January of this year has even surpassed that of the highly regarded artificial intelligence (AI) and decentralized physical infrastructure network (DePIN) concept tokens at that time. This phenomenon is interpreted as an early signal that retail funds may be flowing back, while also reflecting investors' continued attention to projects with innovative narratives and high growth potential.

Market observers have noted that the total market capitalization of cryptocurrencies excluding Bitcoin and Ethereum (TOTAL3 chart) is entering the so-called "Banana Zone 2.0," which typically indicates that the market is about to experience explosive growth. Some analysts believe that the upcoming wave of market activity could be "larger and faster" than the altcoin surge of 2020, supported by real-world application scenarios and substantial funding, indicating that the altcoin market may be shifting towards a more sustainable growth model driven by fundamentals and institutional capital.

Currently, the altcoin season index is 32/100. Although it is still some distance from the "altcoin season" threshold of 75 points, it has recently shown a positive upward trend. This suggests that early signs of capital rotation are emerging. Historically, the arrival of altcoin season is usually accompanied by an increase in the dominance of altcoins, rapid price increases, and heightened market sentiment.

Crypto analyst Satori pointed out that the current Bitcoin price remains stable or shows moderate increases, while its share in the total crypto market capitalization has decreased. This pattern has been reflected in historical cycles such as those in 2017 and 2021, often seen as a sign of funds rotating from Bitcoin to alts.

Multiple factors may have driven this round of capital rotation, including:

1. The launch of the spot ETF provides a compliant entry channel for institutional funds, and some funds may spill over and flow into altcoins with higher growth potential.

2. The advancements in Layer 2 (L2) technology have improved the scalability and efficiency of the main chain, providing support for the implementation of more application scenarios.

3. The combination of artificial intelligence and blockchain, the development of tokenization of real-world assets (RWA), and the improvement of blockchain gaming infrastructure have brought new value narratives and application prospects for alts.

Although the duration of this "mini altcoin season" remains to be seen, the positive signals released by the market indicate that investors are re-embracing risk, injecting new vitality into the crypto market.