Altcoin Rally: This Time the Data’s Different

Altcoin Rally: This Time the Data’s Different

BTC’s rally took a breather after notching consecutive record highs last week, with ETH, XRP, and other altcoins booming in the meantime. While BTC is up over 11% since the end of June, altcoins have outperformed in the same span of time.

The outperformance relative to BTC highlights the strength of altcoins at present. BTC has largely dominated the recent market highs, but assets like ETH and XRP are massively outperforming the original cryptocurrency at present.

This outperformance is also reflected in Kaiko Indices broad-based index products, where both the KT5 and the KT10 are up 23% and 24%, respectively, since June 1.

Altcoin spot trading volumes have surged during the rally, with daily volumes for top altcoins reaching as much as $44 billion last week. As a result, combined altcoin volume eclipsed BTC on several days. This shift in volume dynamics and the rising prices of major alts could signal the beginning of a broader market move into altcoins, typically known as an “altcoin season”. However, there have been several false dawns when it comes to this type of rotation, with all previous moves flattering to deceive.

One clear difference in this particular move is the higher liquidity for altcoins on major venues. While trade volumes have yet to reach yearly highs, liquidity is breaking new ground. Looking at 1% market depth (the sum of all bids and asks 1% from the mid-price), we can see every major alt has improved in the past few weeks. ETH is at annual high at an average of nearly $20mn, while XRP’s record-breaking move is supported by a healthy order book.

XRP is seeing more interest than SOL at present, despite the former seeing its first staking ETF launch in the U.S. early this month. Perhaps this is unsurprising though as XRP trades near record highs and SOL continued to trade below $200 last week.

Another data point to note, which could support sustained moves in altcoins, is the volatility profile of most of these coins. Similar to BTC’s recent record-breaking move, altcoins have rallied during a low volatility environment.

While some of this subdued volatility might be explained by these assets being overlooked in favour of BTC and memecoins in recent months, another factor is the maturity of the market and institutional demand. ETH, SOL, and XRP (which we discuss more below) have all seen healthy demand from traditional financial product streams in recent weeks, with CME futures flying and record inflows into ETH exchange-traded funds.

While there have been some periods of rotation into alts in recent months, nothing has been sustained, as mentioned above, but the timing of this move and the improved liquidity situation now lends itself to a sustained rally. If altcoins can maintain this level of demand through August and into September, when volumes should naturally increase after summer, then there is a real possibility of a 2021 style rally into year end.

Data Points

XRP Sets New Record High

The recent rally saw XRP set a new all-time high for the first time in seven years. As noted above, XRP is now up over 60% since the beginning of June, as altcoins see increased demand. The interest in XRP isn’t just limited to speculation but appears to be supported by rising institutional demand as well as stable activity in perpetual futures markets.

The move comes just over two years after a judge partially ruled in favor of Ripple Labs in its case with the SEC. Since then there has been a plethora of changes in the U.S. and XRP’s case was fully dropped earlier this year. The new environment around digital assets in the U.S. has massively benefited XRP, with the CME even launching futures on the digital asset in May. There has been over $2bn in total notional traded since XRP futures launched, with a record setting $630mn on Friday alone.

It’s not just regulated futures that are seeing increased demand. XRP perps have seen increased activity in recent weeks as well, climbing to near highs last seen during 2024’s post election rally.

Funding rates have also spiked as volumes climb higher, however, they remain more subdued compared to last year’s moves. This suggests the move isn’t overly levered and there is less risk of a major deleveraging event at present.