A Surprising US Stocks Correlation Suggests Altcoin Season Is Far From Over

The altcoin market just recorded its most significant monthly recovery of the year. While most “altcoin season” predictions focus on crypto indicators, one overlooked factor is its correlation with US small-cap stocks.

So, what does this correlation suggest? Here are some deeper insights.

Altcoin Season Gets Macro Boost From US Small-Cap Stock

According to Bravos Research’s findings, the altcoin market shows a strong correlation with US small-cap stocks, as represented by the Russell 2000 Index.

The iShares Russell 2000 is an ETF (Exchange-Traded Fund) managed by BlackRock. It is designed to track the performance of the Russell 2000 Index, which represents 2,000 small-cap companies in the US.

Data shows that the altcoin market cap has closely mirrored the movement of US small-cap stocks since 2019. This could be because investors view both asset classes as high-risk, high-reward.

In their latest video analysis, Bravos Research notes that small businesses and altcoins have yet to fully recover. Meanwhile, investors are paying more attention to large-cap companies and Bitcoin.

This trend reflects a narrow economic recovery. The recovery isn’t strong enough to drive capital into riskier assets.

“And that is also reflected in the behavior of crypto investors. During these moments where you have a narrow economic recovery and stock market recovery, you also have a narrow recovery in the crypto market,” Bravos Research reported.

However, the analysis also points out a recent uptick in small business optimism. The Small Business Sentiment Index is now rising—similar to 2016, 2020, and 2021 trends—signaling improving economic conditions. If this trend continues, small-cap stocks may surge.

Combined with its correlation to the crypto market, the positive sentiment in low-cap stocks may indicate that the altcoin season still has more room to grow.

Altcoin Market Pulls Back in Early August, But Sentiment Remains Strong

The altcoin market turned red in early August following a strong July rally. TOTAL3’s market cap (excluding BTC and ETH) dropped from a July high of $1.09 trillion to around $965 billion—a nearly 12% decline.

However, this decline doesn’t seem to have shaken investor sentiment. The Crypto Fear & Greed Index remains in the “Greed” zone.

Additionally, Coinvo’s Altcoin Interest indicator has sharply increased since the start of the year, reflecting renewed enthusiasm among retail investors.

“Retail is fully back in action and Altcoin Season is finally here,” Coinvo reported.

A recent report from BeInCrypto also highlights the drop in Bitcoin Dominance and Ethereum’s outperformance over Bitcoin. These are both strong indicators of an ongoing altcoin season.