The altcoin market may be approaching a turning point after several major gauges broke out of year-long downtrends, according to analyst Matthew Hyland.

His charts suggest smaller cryptocurrencies are gaining ground against Bitcoin and traditional risk assets, although rising leverage also increases the odds of a painful correction.

Altcoin Gauges Break Long Downtrends

In a post published on September 7, Hyland said ETH, Total 2, Total 3, and OTHERS had all confirmed the end of their year-plus declines by forming higher highs.

Total 2 tracks altcoins excluding Bitcoin, while Total 3 removes both BTC and Ethereum. OTHERS excludes the top 10 cryptocurrencies and therefore focuses more heavily on smaller tokens. These aggregate indexes are widely used on platforms such as TradingView, where traders follow them as broad measures of altcoin performance against Bitcoin rather than betting on any single token.

Hyland initially questioned whether the moves were simply a "bear market rally," but followed up with a more bullish assessment.

In another post, the market watcher wrote, "The largest #Altcoin Bull Run of all time is loading," and argued it could be "much larger than 2020-2021." The 2020-2021 reference points to the last major altcoin cycle, when accommodation-era liquidity and retail speculation drove outsized gains across smaller tokens before the 2022 downturn erased most of them. The accompanying OTHERS.D/SPX chart provided the basis for that view. It compares the dominance of cryptocurrencies outside the top 10 to that of the S&P 500.

The ratio has been falling for years after reaching a major peak during the 2017-2018 ICO period, and the chart places the current reading near the lower end of that long decline. A lower oscillator on the chart has also moved into an oversold area around 20-30, and the setup is being compared with the overbought reading near 80 seen in 2017.

That does not prove a new altcoin cycle has started, but it does show why Hyland believes the market may be approaching a period of relative strength for smaller tokens. Oscillators and dominance ratios are descriptive indicators: they summarize past price behavior and do not, on their own, forecast future performance.

There are already signs of increased trading activity, with data from Coinalyze showing altcoin perpetual futures open interest had overtaken Bitcoin's for the first time since December 2024. Open interest measures the total value of outstanding derivative contracts that have not yet been settled, so a rising figure signals that more leveraged capital is deployed in the market.

Leverage Adds Another Side to the Trade

The shift comes as altcoins outside the top 10 have pushed their combined market capitalization to $213 billion, up nearly 12% since the start of September.

Zcash has been one of the most dramatic examples. As CryptoPotato reported, it surpassed $1,200, up 370% from its early-June low. Its market cap also moved above $20 billion, putting it ahead of Hyperliquid (HYPE) and Dogecoin ($DOGE), both of which had gained over 11% in 24 hours at the time of writing.

$DOGE and $BNB also posted strong moves in that period, with the former climbing 12% from its Friday low to $0.094, while $BNB went close to $780, its highest level since early February.

But there is a warning. ZEC perpetual futures open interest reached $2.7 billion per CoinGlass, while its move above $1,200 triggered $24 million in liquidations in the last 24 hours, more than $17 million of that being shorts. Liquidations occur when exchanges forcibly close leveraged positions because price moves against them, which can amplify volatility in both directions. Historically, similar shifts in derivatives positioning have come right before corrections in mid-cap tokens.

That leaves two competing signals: the breadth of the altcoin move is improving and several long-term charts have broken higher, but at the same time, leverage is building quickly. As things stand, Hyland sees the first as evidence that the market could be entering a much larger altcoin phase. Whether the breakout sustains itself is likely to become clearer in how the dominance ratios and derivatives data develop from here.