After a challenging year in 2025 for the altcoin sector, optimism is growing among investors for the potential of an early altseason in 2026. This speculation includes not only established altcoins but also memecoins that struggled throughout the past year.
Understanding Altcoin Cycles
In a recent post on social media site X (formerly Twitter), analysts from Bull Theory delved into the critical elements required for an altcoin breakout this year.
One significant point highlighted is that altcoin cycles do not emerge randomly. Historically, they tend to commence once Bitcoin (BTC) and other cryptocurrencies have bottomed and subsequently begin to break out.
For instance, in the fourth quarter of 2016, the ALT/BTC ratio hit its lowest point before experiencing a breakout, leading to a robust altcoin rally in the first half of 2017.
A similar pattern emerged in late 2020, resulting in substantial gains for altcoins in early 2021. This established a clear trend of a bottom followed by a breakout, with altcoins subsequently outperforming Bitcoin.
ALT/BTC Ratio Shows Signs Of Recovery
Currently, the ALT/BTC ratio has been stuck in a downtrend for nearly four years. Technical indicators suggest a potential turnaround; the Relative Strength Index (RSI) is at its most oversold level in history, while the Moving Average Convergence Divergence (MACD) is turning green for the first time in 21 months, hinting at a potential bullish crossover.
These signals suggest that the downtrend may have reached its bottom in the fourth quarter of 2025, setting the stage for a possible breakout reminiscent of earlier altcoin runs.
The analysts also drew attention to the connection between these assets and the equity market, particularly the Russell 2000 index, which recently broke above its previous all-time high. This index reflects broader risk appetite among investors and has historically served as a precursor to altcoin rallies.
In both late 2016 and late 2020, a breakout in the Russell was followed by significant altcoin gains. Now, as the Russell 2000 has broken out again in the fourth quarter of 2025, it mirrors patterns observed just before previous altcoin surges.
Improvement In Market Conditions
Despite these promising indicators, some may wonder why this cycle appears delayed. Many investors anticipated a setup for an altcoin season in 2024, but the analysts note that key triggers were absent during that time.
Factors such as a contracting Federal Reserve (Fed) balance sheet, tight liquidity, and low risk appetite dampened enthusiasm. However, conditions began to improve toward the end of 2025, suggesting that while the cycle may have shifted, it is still very much intact.
Ultimately, analysts at Bull Theory conclude that the anticipated altseason is approaching based on the fact that the ALT/BTC ratio appears to have bottomed out in Q4 of 2025, the Russell 2000 has achieved a breakout in the same period, liquidity has improved, and greater regulatory clarity is expected heading into 2026.
Ethereum (ETH), the market’s leading altcoin, is trading at $3,200, having recorded gains of almost 10% over the past seven days. However, this has been outperformed by XRP, which recorded a notable 21% gain during the same period.
Featured image from DALL-E, chart from TradingView.com
