What is altcoin season? – And how you can thrive in it

- 5 minute read

Kevin van der Linden
Passionate Content Writer
Kevin van der Linden

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

  1. What are altcoins?
  2. What can you expect from an altcoin season?
  3. Signals that precede altcoin season
  4. How to profit during an altcoin season?

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.

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. 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? 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.