Bitcoin (BTC), the largest and oldest cryptocurrency, has been leading the digital asset rally of late, but there are early signs of a so-called "altcoin season" impending, when smaller tokens are outperforming, analysts said.

BTC is already near its all-time high set in 2021, hitting $64,000 this week alongside strong inflows into spot bitcoin ETFs. It's gained 48% since the start of the year, while the broad-market CoinDesk 20 Index (CD20) was up 33% during the same period, highlighting the underperforming altcoin sector.

This could soon change, though, K33 Research analysts said in a Friday market report.

"Judging by history, altcoins will start outperforming about the time we are now," K33 wrote. The report noted that bitcoin's market cap has doubled relative to the total value of all cryptocurrencies except BTC and ether (ETH) since the November 2022 market bottom. The setup, say the analysts, is similar to that of late 2020 before altcoins started to catch up to BTC's run.

This week's "tremendous" meme coin rally might be a "possible early sign" of the impending altcoin season, they added.

Popular dog-themed tokens dogecoin (DOGE) and shiba inu (SHIB) booked 40%-50% gains this week, while newer entrants like pepe coin (PEPE) bonk (BONK) and dogwifhat (WIF) doubled or more in price during the same period.

However, the report pointed out that timing the altcoin season is a "risky sport," as the bitcoin ETFs have altered the crypto investment landscape, and there's no guarantee that the money flowing to bitcoin will eventually trickle down to smaller assets. "There is enough risk appetite to send a select few alts on big runs, but we have yet to see a new wave of retail entering the altcoin arena to create the rising tide that lifts all boats," said K33.

Watch ETH for alt season confirmation

Swissblock analysts said in a Friday market update that "signs point to an imminent alt season."
According to a chart shared on Telegram, the median return of altcoins versus bitcoin appears to be reaching a bottom, and could turn soon, lifting altcoin prices relative to BTC.

The key signal to look for to confirm the start of a period of altcoin outperformance is ETH's clearing the $3,500 price threshold, Swissblock said.