After Bitcoin (BTC) reached an all-time high and entered a consolidation phase, the so-called 'altcoin season' has fully begun, with major altcoins showing a sharp increase. However, an analysis has been raised that excessive leverage-driven speculative overheating is accumulating. This is a warning that it could lead to significant volatility risks across the cryptocurrency market.
Bitcoin set a new all-time high by surging from $105,400 to $122,700 in July, but is currently slightly below that level and unable to break out of its stagnation. In contrast, major altcoins such as Ethereum (ETH), Solana (SOL), XRP, and Doge are driving a clear upward trend.
According to the analytics platform Glassnode, this market trend continues the altcoin season signs that began on July 7th, and the market capitalization of altcoins centered on Ethereum has increased by approximately $216 billion in the past two weeks. This is considered one of the largest increases in US dollar terms.
The price movement between Bitcoin and altcoins is gradually decoupling. With high correlation among altcoins, analysis suggests that investor sentiment and capital rotation flows are having a greater impact than individual fundamentals.
Meanwhile, this is also producing the side effect of serious leverage accumulation in the market. According to Glassnode, the open interest of the four major altcoins, including Ethereum, Solana, XRP, and Doge, has surged from $26 billion to $44 billion in July. Notably, maintaining a state above two standard deviations for 12 consecutive trading days is unprecedented.
This leverage concentration has a 'reflexive' characteristic that amplifies the upward trend while also expanding potential losses during a downturn. Therefore, it creates a structure that increases the possibility of a sharp pullback after an explosive rise.
Glassnode also revealed that participants in the current altcoin futures market are paying approximately $32.9 million in funding costs monthly for long positions. This is close to the peak of the Bitcoin bull market in March 2024 and slightly below the all-time high when it broke through $100,000 at the end of 2024.
Asset allocation among market participants is also changing noticeably. Ethereum's open interest share has risen to 38%, while Bitcoin's has decreased to 62%. This indicates that funds are moving from Bitcoin to altcoins and shows speculative cyclical buying pressure is concentrating around Ethereum. It's particularly noteworthy that Ethereum's perpetual futures trading volume proportion has first overtaken Bitcoin's.
If Bitcoin's sideways movement is prolonged or shifts to a slight decline, the current aggressive altcoin positions could become a trigger for a sharp drop. This is because a bull market based on leverage has a vulnerable structure.
In summary, while altcoins are currently continuing a powerful rally, this relies more on leverage and investor overheating sentiment rather than healthy fundamental value. This environment requires caution as it potentially intensifies market instability and volatility risks in the long term.
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