Altcoin season or Altseason is a time where funds shift from bitcoin to alternative cryptocurrencies, triggering rapid and price surges across most digital assets.
Characterized by extreme volatility and spectacular gains, Altseason is a lucrative period for crypto traders, usually lasting several weeks or months, this cycle sees investors diversify beyond bitcoin, sparking fear of missing out (FOMO) investments that propel altcoin prices to extraordinary heights. Good investors can make good profits during Altseasons by timing their sales before the cycle ends.
Read Also: Ethereum and Altcoins: What are the Opportunities in the Altcoin Market?
Indicators of Altseason
Bitcoin dominance is an important metric for traders to determine optimal times to buy or sell altcoins. When bitcoin dominance is on the rise, indicating increased investor interest in bitcoin, it is generally not ideal to invest in altcoins. This uptrend suggests investors prefer holding bitcoin, driving altcoin prices down as they sell. Holding altcoins during this period can result in losses and missed opportunities, as bitcoin’s rising price means potential gains are sacrificed.
However, a decline in bitcoin dominance, indicating investors are selling bitcoin for altcoins or fiat currency, commonly signals the onset of Altseason. This shift in market sentiment sparks an influx of funds into altcoins, making it a good time to hold them.
Historically, sharp declines in bitcoin dominance have preceded significant Altseasons, characterized by rapid price surges in altcoins. While Altseasons are not strictly defined, investors can still profit from altcoins outside of these periods. However, with increasing interest and capital flowing into the crypto space, future bull runs and Altseasons may deviate from past patterns, presenting potential for growth and opportunities.
To predict Altseason, investors use tools like the Altcoin Season Index. This index tracks the performance of the top 50 altcoins relative to Bitcoin over 90 days. If 75% of these altcoins outperform bitcoin, it signals Altseason. The index provides valuable insights into long-term trends and potential Altseason indicators.
Additional indicators include increased relative trade volume, social media activity, mainstream interest, new coin listings, and news articles from crypto projects. A notable example is the 2017 decline in bitcoin dominance from 69% to 37% in 35 days, coinciding with the start of the largest Altseason in crypto history. Sharp declines in Bitcoin dominance tend to precede significant spikes in altcoins.
Furthermore, historical bull runs and Altseasons reveal valuable patterns. Larger-cap altcoins, such as Ether, usually surge before smaller-cap altcoins. This occurs after bitcoin’s upward movement and subsequent sideways consolidation, prompting investors to seek gains in altcoins and decreasing bitcoin dominance.
Tools like the Bitcoin Rainbow Chart provide a long-term perspective, disregarding daily volatility and offering insights into price patterns and cycle stages. While not an exact science, these indicators and patterns help investors anticipate and navigate Altseason.
Read Also: Negative sentiments by new market participants behind bitcoin’s bearish phase- Bitfinex Alpha
Read Also: Introduction to Altcoins: Strengths, weaknesses, opportunities, and threats
Are we in Altseason?
According to the Altcoin Season Index, Altcoin Season is officially underway when 75% of the top 50 cryptocurrencies (excluding stablecoins like Tether and DAI, and asset-backed tokens like WBTC, stETH, and cLINK) outperform bitcoin over a 90-day period.
This is not the case for the market at the moment, as bitcoin is outperforming most altcoins.
Read Also: Bitcoin, altcoins regain momentum as U.S. Fed cuts interest rates by 50 basis points
How to Prepare for Altseason
Preparing for Altseason requires a strategic and informed approach. To capitalize on potential gains, investors should diversify their portfolios by researching and selecting promising altcoins. This involves staying up to date on market trends, tracking coin performance, and monitoring project developments.
Additionally, setting clear investment goals, having risk tolerance, and knowing your exit strategies are crucial. Manage expectations, as Altseason’s volatility can lead to price swings. Investors should also maintain a balanced portfolio, allocating funds across various asset classes to minimize risk.
To maximize Altseason gains, consider the following tactics:
- Monitor bitcoin dominance and market sentiment
- Set price alerts and track technical analysis
- Stay informed through social media, news, and crypto communities
- Diversify your portfolio with a mix of large-cap and small-cap altcoins
- Implement risk management strategies, such as stop-loss orders and position sizing
- Stay adaptable and prepared to adjust investment strategies as market conditions evolve
- Consider dollar-cost averaging to mitigate volatility
- Keep emotions in check and avoid impulsive decisions based on FOMO or fear
Read Also: Halving-Induced Rally: Evaluating the probability of a month-end bitcoin surge
Solomon Victor is a Technical Analyst who is also knowledgeable about various aspects of blockchain and cryptocurrency.
