An analyst has identified a bearish pattern on the USDT dominance chart which now signals an impending rally for the altcoin market
- USDT dominance patterns suggest a potential upcoming altcoin season, as per analyst predictions. Solana’s declining metrics and performance indicate a bearish sentiment, with market fundamentals not yet supporting a rally.
The altcoin market has faced a rollercoaster ride throughout 2024, peaking above $1.27 trillion in March before entering a consistent downward trajectory. Since then, the market has formed a series of lower highs and lower lows, indicating a general bearish trend.
Despite occasional upticks in valuation, these have not sufficed to offset the losses from earlier in the year. Most recently, the altcoin market cap reached a valuation of $921 billion late last month but has since retreated to $872 billion.
This downward trend has prompted speculation about a potential altcoin season. Notably, a crypto analyst known as Moustache has shared an optimistic view regarding the upcoming altcoin season based on an analysis of Tether’s (USDT) dominance.
Technical pattern signals bullish trend for altcoin market
On the social media platform X, Moustache highlighted that USDT’s dominance is currently forming an “ascending broadening wedge” pattern, which typically has bearish implications.
Source: Moustache on X
The analyst pointed out that USDT has been trapped in this pattern for over six months and suggested that this could signify a bearish “backtest” phase. Following this, Moustache believes the much-anticipated “altcoin season” could emerge, offering potential opportunities for altcoin holders.
For context, an ascending broadening wedge is a bearish reversal pattern characterized by two diverging trend lines that widen as they move upward. This indicates increased volatility and indecision within the market. Generally, when an asset or indicator forms such a pattern, it hints at the possibility of an upcoming downward breakout.
In the context of USDT dominance, a bearish breakout could suggest a capital flow back into altcoins, potentially sparking an altcoin rally or “altcoin season.”
Solana as a use case
While the potential for an altcoin season looms, a closer examination of key altcoins’ performance and fundamentals is necessary to validate this possibility. For example, Solana [SOL], one of the major altcoins in the market, has faced significant challenges in recent weeks.
Solana has exhibited a consistent decline in value and usage metrics over the past week. The altcoin has seen its price decline by 6.2% in the last seven days, with an additional drop of 4.2% in the past 24 hours.
SOL was trading around $141.51 at press time, reflecting a bearish trend and raising questions about its near-term outlook.
More concerning is the sharp drop in Solana’s active addresses—a key metric reflecting retail investor engagement and activity on the network.
Data from Solscan indicates a massive reduction in active addresses, dropping from over 5 million last month to just around 1.3 million at present.
Source: Solscan
This steep decline in active addresses points to a weakening interest in Solana’s network activities, which can be attributed to reduced network participation, lower transaction volumes, and potentially declining confidence among retail investors.
Additionally, Solana’s open interest has also experienced a downturn, falling by approximately 7% to a current valuation of $2.27 billion. Open interest reflects the total number of futures contracts or options outstanding, and a decline in this figure could signify reduced trading activity or a lack of speculative interest in the asset.
Source: Coinglass
Correspondingly, the open interest volume for Solana has dropped by 29%, now valued at around $7.25 billion.
This further underscores diminishing market interest in the asset, with lower trading volumes contributing to a less favorable market environment for SOL.
Overall, with several declines found in our use case for the altcoin market—SOL— it appears that while analysts such as Moustache are suggesting a bullish momentum for the altcoin market, the fundamentals are yet to align with this bullishness seen in the technical perspective.
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