Recently, the focus of the cryptocurrency market has shifted to some small-cap altcoins, which have recorded several-fold increases in a short period, sparking market discussions. Taking a platform token like MYX/USDT as an example, its price surged significantly within a few days, driven by news catalysts—announcing the launch of a token related to a former U.S. president, which ignited market sentiment. At the same time, contract open interest soared to a historical high, indicating a rapid influx of leveraged funds. While such trends create a "prosperous scene," they also hide risks: coins lacking spot liquidity can easily be controlled by a few large holders, and once the main players cash out, the market often reverses instantly, making ordinary investors vulnerable to high-level buy-ins.

The Altcoin Rally Often Arises from Weakening BTC Momentum

Looking at historical cycles, collective exuberance in altcoins often occurs during the stagnation phase following a significant rise in BTC. When BTC momentum slows, funds begin to shift towards ETH, and an upward ETH/BTC exchange rate becomes a signal of increased risk appetite. Subsequently, some funds continue to flow into small and mid-cap coins, driving a broad sector rally, leading to a decline in Bitcoin's dominance and an increase in the market cap share of altcoins. Similar situations were observed at the end of 2017 and in the first half of 2021: after BTC peaked, ETH, DeFi sectors, and meme coins strengthened in succession, and market sentiment entered a "full-blown frenzy" mode.

Currently Closer to "Partial Rotation" Rather Than a Full Altcoin Season

From a macro perspective, expectations for a Federal Reserve rate cut in September are rising, the U.S. dollar index is weakening, and the global liquidity environment is becoming more accommodative, providing external support for risk assets. On-chain capital flows are also showing positive signs, with stablecoins continuously flowing into exchanges, the ETH/BTC exchange rate rising, and BTC dominance falling from a mid-year high of 65% to 59%, indicating that funds are partially spilling over. However, unlike past instances of widespread rallies, the current standout performances are still concentrated in a few sectors, such as AI, RWA, and GameFi. Most small-cap coins have not experienced systemic increases, making "partial altcoin season" a more reasonable definition.

Market sentiment is also warming but not overheated. Implied volatility in options has risen, and the speculative activity of some altcoin contracts has increased, but the overall market has not entered an extreme state of euphoria. In other words, while investors are chasing returns, they still maintain a degree of rationality. In this state, although some coins may experience short-term surges, it does not mean that the market has entered a full altcoin rally.

While Seizing Opportunities, Greater Attention Must Be Paid to Risk Management

Investors at this stage cannot ignore opportunities, nor can they overlook risks. The high elasticity of altcoins means they may bring excess returns in the short term, but they can also accompany drawdowns exceeding 50%. A more prudent approach is to use BTC and ETH as core allocations to hedge overall volatility while allocating limited positions to altcoins supported by themes and liquidity. At the same time, it is essential to set clear profit-taking and stop-loss levels and use hedging tools to reduce exposure during extreme market conditions.

Matrixport Provides Strategic Tools to Support Rational Allocation

In the current environment of high volatility and gradual capital rotation, investors need to capture opportunities while controlling risks. Products like Daily Dual Currency can help investors earn interest or build positions at discounted prices during fluctuations; Accumulator is suitable for medium to long-term bullish investors to accumulate positions gradually; FCN offers opportunities to earn fixed coupon payments during range-bound markets; while Decumulator allows large holders to reduce positions in an orderly manner at high levels, avoiding emotional trading.

Matrixport's structured product system provides investors with a flexible toolbox of strategies, helping clients with different risk preferences to be well-prepared during the "altcoin season" brewing period: capturing profit opportunities from market volatility while reducing risks during extreme conditions through disciplined allocation, achieving more stable long-term returns.

Disclaimer: The market carries risks, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.

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