Armed with charts, many analysts argue that the altcoins "to the moon" moment has started. However, not all altcoins behave the same. Native currencies’ prices reflect the changing situation in the smart contract space, and some Web3 narratives are doing better than others.

What is altcoin season?

Altcoin season is a period when altcoins outperform bitcoin in the cryptocurrency market. It usually happens in the last year of bitcoin’s 4-year cycle, as market enthusiasm spills over from bitcoin to other coins. Investors seek "miracle coins" capable of parabolic rises, dragging along the whole of the crypto market.

Historically, altcoin seasons start with ether and large-cap coins leading the way, followed by a market-wide bull run. Mid- and small-cap coins, including memecoins, then ride the FOMO wave, often disregarding specific cryptoassets’ fundamentals. This stage usually signals an overbought market, leading to a correction and eventually a bear market.

Has the altcoin season begun?

There are several indicators pointing to the arrival of altcoin season, and they leave little room for doubt.

Bitcoin dominance (BTC.D), steadily rising since 2022, has recently seen a sharp drop from 61% to 55% of the crypto market.

The Altcoin Season index, calculated by Blockchain Center, confirms this shift. The website’s methodology is simple: if over 75% of the top-50 coins have performed better in the past 90 days, it is the altcoin season. At the time of writing, this index has reached a confident 90%.

The smaller-cap cryptoassets seem ready to take off, at least if the past is any indication. As pinpointed by the crypto analyst Crypto Rover, the total crypto market cap excluding the top-10 coins may be nearing a spike.

Finally, the Google search trend for "altcoins" has surged, reaching an interest index of 75. For context, the peak of 100 was reached in the previous altcoin season in 2021.

Which coins are leading?

Bitcoin’s 120% year-to-date (YTD) growth is impressive, but some altcoins have outshone it. Among the top-50 market cap coins (excluding stablecoins and wrapped assets), six have gained over 300% YTD. Among them, centralized exchange token White Bit (WBT +305%), layer-1 blockchain Ripple (XRP+310%), memecoin Dogecoin (DOGE +351%), layer-1 SUI (+336%), memecoin PEPE (+1,409%), and memecoin Dogwifhat (WIF +1,990%).

Four other layer-1 blockchains achieved over 200% growth: Tron (TRX +255), Toncoin (TON +213%), Stellar (XLM +288%), and Hedera (HBAR +252%).

However, not all alts have kept pace. Ether, the second-biggest cryptocurrency, has shown disappointing results, growing only by 59% YTD. Several other long-standing blockchains, both layer-1 and layer-2, have also underperformed: Polkadot (DOT +33%), Avalanche (AVAX +31%), APTOS (+46%), and Internet Computer (ICP +15%). Even worse, some coins have posted negative YTD trends, with the most notable being Ethereum layer-2s: Polygon (POL -29%), Arbitrum (ARB -36%), and Optimism (OP -34%).

This situation highlights the growing saturation in the smart contract platform space. With an overabundance of layer-1 and layer-2 blockchains, some will inevitably fade away, while others will see their market share decline. Strong alternatives to Ethereum, like Solana and BNB, are already well-established, raising questions about the long-term relevance of the many layer-2 solutions built on it.

Navigating crypto narratives

When analyzing the crypto market, it's important to remember that apart from Bitcoin, most blockchains primarily serve as the foundation for Web3—a decentralized internet. This means that the success of native blockchain currencies, such as ETH or SOL, ultimately hinges on the adoption and performance of Web3 (and sometimes Web2) protocols built on these platforms.

Tokens representing various Web3 protocols are typically smaller-caps, and their individual price actions depend on many different factors. However, by grouping them into categories, we can assess the strength of the most popular crypto narratives.

According to the Blockchain Center data, this year, the most remarkable performance can be attributed to the RWA, or real-word asset coins, which grew by 686%. These include simple RWAs, like PaxGold, or protocols that rely on RWA, like Pendle. AI-related coins are still going strong with a 633% growth. They are followed by memecoins (+591%) – the inevitable hallmarks of every altcoin season. DePIN, or decentralized physical infrastructure coins, have grown by 405%, and crypto gaming coins by 192%.