What is altcoin season? – And how you can thrive in it
- 5 minute read
Altcoin season is a crypto phenomenon, where most cryptocurrency prices surge with the exception of Bitcoin. While the Bitcoin price drops, many investors make profits via (smaller) projects. Most people want to make the most of an altcoin season. To do this it is important to know what altcoins are, when an altcoin season starts and when it is time to sell your coins.
Table of Contents
- What are altcoins?
- What can you expect from an altcoin season?
- Signals that precede altcoin season
- How long does an altcoin season last?
- When is the perfect time to buy altcoins?
- How to profit during an altcoin season?
- An altcoin season starts when 75% of the top 50 altcoins outperform Bitcoin in terms of market capitalisation during the last 90 days according to Blockchain Center’s ‘Altcoin Season Index’.
- Altcoin season is a crypto phenomenon, where most cryptocurrency prices surge with the exception of Bitcoin.
- Altcoin stands for "alternative coin". An alternative coin is any other crypto besides Bitcoin. The name is based on the idea that Bitcoin was the very first cryptocurrency and that all other coins are seen as alternatives to Bitcoin.
What are altcoins?
Altcoin stands for "alternative coin". An alternative coin is literally any other crypto besides Bitcoin. The name is based on the idea that Bitcoin was the very first cryptocurrency and that all other coins are seen as alternatives to Bitcoin.
The most well-known altcoin is Ethereum. The market cap of Ethereum is half that of Bitcoin, despite being an altcoin. Also, coins such as Cardano, Chainlink and Tether are "just" altcoins despite their high market value.
What can you expect from an altcoin season?
An altcoin season is triggered when the Bitcoin dominance falters in contrast to the other cryptocurrencies. The Bitcoin dominance can be described as the ratio between the market value of Bitcoin and the combined market value of the other currencies. Bitcoin is the largest currency in terms of market capitalisation and has (together with Tether) the most trading volume per 24 hours. Bitcoin dominance is therefore the most important factor to keep an eye on when spotting an altcoin season.
Before an altcoin season begins, altcoins gain ground on Bitcoin in terms of market capitalisation. Investors prefer to invest their money in altcoins or transfer their Bitcoins to altcoins. As a result, the percentage ratio between the value of Bitcoin and altcoins decreases.
According to experts, an altcoin season is when 75% of the top 50 altcoins outperform Bitcoin in terms of market capitalisation during the last 90 days. Blockchain Center has created a nifty ‘Altcoin Season Index’. According to their index we are now below 75% and thus they conclude that we are currently not in altcoin season.
Signals that precede altcoin season
There are several signals that indicate an altcoin season. These triggers can happen individually or in tandem. Examples of possible triggers of an altcoin season are:
- The bull run: a bull run means that investors are optimistic about the future expectations of crypto. This brings a lot of extra money into the crypto market and starts the bull run. When investors have high profits in Bitcoin, they tend to reinvest some of their profits. Bitcoin dominance shifts at that point. Many investors keep an eye on this moment.
- Hype of a certain (type of) altcoin: 2020 saw a massive hype in the crypto world around DeFi (Decentralized Finance) and during 2020/2021 the NFT (Non-Fungible tokens) market exploded. Many DeFi and NFT altcoins received media attention and the market value of several coins (such as Ethereum and Binance Coin) increased tenfold. This caused Bitcoin's dominance to lose a substantial amount of ground in terms of market capitalisation.
When a new crypto trend takes the world by storm, it can often kickstart an altcoin season. As more people become interested in crypto, they may look to explore different options and opt to invest in altcoins that are related to the emerging trend. This surge in interest and investment can cause these altcoins' market capitalization to inflate and create a short-term ‘hot market’ for the token.
A perfect example of this phenomenon is DeFi (Decentralized Finance). When DeFi exploded the cryptocurrency market in 2020, many investors began flocking to different DeFi tokens as well as other cryptos related to the DeFi ecosystem. This resulted in substantial growth for a number of altcoins, some of which had been dormant for quite some time before then. The demand caused prices of these tokens to rapidly increase, leading people to believe that an upcoming altcoin season was upon us once again.
Altcoin seasons also tend to be closely connected with blockchain development milestones. For example, when Ethereum 2.0 was first announced back in 2019, it caused a huge spike in interest for ETH and many other related cryptos involved with the Ethereum blockchain or are built on top of its infrastructure. Projects such as Uniswap were amongst those which benefitted most from this surge; prior to Ethereum 2.0’s announcement their token had been hovering at around $2 per coin, but following the news it quickly shot up over $8 by early 2021 due largely in part due its close association with Ethereum.
The same can be said for other blockchain trends such as NFTs (Non Fungible Tokens) or Web 3/DApps (Decentralized Applications). Fueled by growing consumer demand and increasing rates of adoption amongst developers, projects involving these technologies have seen massive growth over recent years - thus creating ample opportunities for investors looking at getting into specific altcoins during a potential altcoin season. Of course, one must always be aware that these sorts of crypto trends don't necessarily last forever – such is nature of markets that involve highly speculative assets. So while investing in certain altcoins during an ‘altcoin season’ may yield massive returns initially, one must always keep an eye on how long such trends will remain active before eventually tapering off and returning back to more stable levels.
How long does an altcoin season last?
Altcoin seasons, also known as crypto winter, can last from a few weeks to a few months. The length of an altcoin season is largely determined by market conditions and the amount of attention the coins involved receive. For example, a coin with a large and active user base may experience significant growth during an altcoin season, while most other coins may remain relatively flat or even drop if they don't have enough user traction.
In some cases, the duration of an altcoin season may be extended by external events such as news announcements or regulatory changes. For example, in December 2020, Ethereum's long-awaited transition to proof-of-stake (PoS) was announced, helping fuel ETH's meteoric rise. This event also caused a domino effect in smaller altcoins as investors looked for alternative investments and projects with potential upside.
Furthermore, it is also important to note that an altcoin season can lead to longer periods of market stagnation in which prices barely move. Some experts say this is the perfect time to buy your crypto, while others refrain from buying at all due to the market cap of many coins that will fall during this period of time.
The crypto market is extremely volatile and unpredictable, so it is impossible to accurately predict how long any given altcoin season will last. Only through careful analysis, research and strategic trading can investors maximize their returns when participating in the cryptocurrency markets.
When is the perfect time to buy altcoins?
When it comes to investing in an altcoin season, investors should take into consideration various factors such as the coin’s fundamentals, market sentiment, and technical analysis. For investors who are looking for long-term investments, it is important to take a look at the coin’s fundamental value and its potential growth. Investors should compare the fundamentals of different altcoins and pick out those which have strong fundamentals and are backed by experienced teams.
Once the decision on which coin to invest in has been made, investors must consider current market conditions such as overall sentiment in the crypto market, news events, trading volume and so on before investing. On top of that, investors should also pay attention to technical indicators such as moving averages, price trends and support/resistance levels when determining an optimal time for entry into an altcoin investment. All these technical indicators help identify key price points where buying or selling may be more profitable than other times. Additionally, investors should keep track of any changes in trading volume as this can indicate shifts in market momentum that could signal a good opportunity to buy or sell.
Overall, there is no single “perfect” time for investors to buy in an altcoin season because markets continuously fluctuate due to news events or developments within the cryptocurrency industry. Therefore, it would be wise for investors to always stay up-to-date with the latest news regarding their chosen coins so they can make informed decisions about their investments. In addition, it would be beneficial for investors to have some knowledge about fundamental analysis and technical indicators so they can better judge when is the best time to enter or exit their positions depending on their strategies and goals.
How to profit during an altcoin season?
It is difficult to predict the end of an altcoin season. This makes it difficult to estimate when you should sell your altcoins. There are, however, certain signs you can follow such as:
- Predetermined profit: Determine in advance what percentage you want to get out of your investment when you reach a certain return. This will avoid disappointment when the price of the altcoin drops.
- Pay attention to technical indicators: There are thousands of indicators that all tell you something different. Make sure you choose a number of indicators which you can depend on. Do several of these indicators show that the market is going down? Then try to transfer some of your altcoins to a stablecoin like Tether so you can reinvest flexibly once the price drops.
- Parabolic altcoins: It is possible for altcoins to go parabolic in market value during a bull run (or altcoin season). The past has shown that coins never rise indefinitely. Try to take your profits during a parabolic run, otherwise you may be disappointed at the end of the line.
- Don't be greedy: It happens quite often. An investment has just reached an all-time high and you think: what if the price doubles again? Many investors will act selfish, and some will even think the altcoin season will continue forever. Even when Bitcoin drops in price, many people will believe that this will be 'their' season. At such a moment, it is better to put your money where your mouth is. It is sensible to (gradually) take out at least part of your profit.
Cryptocurrencies and technical analysis remain a matter of conjecture. That's why you should always do your own research and try to find out which strategies work best for you. For those wondering if the altcoin season has started already, be sure to check out the altcoin season index. The next altcoin season might just be around the corner.
At Anycoin Direct, we have a large portfolio of altcoins.