Altcoin Market Cap Jumps 45%, but Signs of Overheating Are Emerging

Large sums of capital continue to flow into the altcoin market, extending the rally, but several indicators are beginning to signal overheating, according to a market analysis.

CryptoQuant contributor Darkfost wrote on September 26 that the altcoin market may be approaching a key inflection point. TOTAL2, a gauge of the combined market capitalization of altcoins including Ether, has increased by more than $371 billion since June, rising 45% in just a few months.

The advance has also become more broad-based across the altcoin market. In August, 80% of altcoins listed on Binance were trading below their 200-day moving average. That figure has now reversed, with 87% trading above the level.

Only 13% of altcoins remain below the 200-day moving average.

Darkfost said the shift shows buying interest has spread across the altcoin market as a whole, while also pointing to the possibility of market overheating. In past periods when a large number of altcoins traded above their long-term moving averages, upward momentum gradually weakened.

The volume of altcoins flowing onto exchanges is also increasing. Altcoin deposits on exchanges have reached their highest level since October of last year, which marked the previous market peak. The recent weekly average number of deposit transactions was 22,700 on Binance and 8,300 on Coinbase, with about 32,000 more across other exchanges.

Even so, current exchange inflows remain limited compared with the early phase of the previous bull market. Darkfost also focused on the emergence of bearish divergence in TOTAL2's relative strength index, or RSI, where the price uptrend has started to diverge from momentum readings.

He described those indicators as early warning signs that altcoins' upward momentum could weaken. Still, the current data alone do not confirm that the market has reached a peak or is entering a broader downturn, meaning fund flows and price moves will need to be monitored together.