Key takeaways
- Altcoin season is the period when the market capitalization of altcoins has become higher than that of Bitcoin (BTC).
- During this period, investors will have a strong affinity and interest for Bitcoin alternatives like SOL, ETH, DOGE, and SHIB etc.
- In altcoin seasons, the dominance of Bitcoin dips, and altcoins will outperform BTC.
- Rapid price increases for the majority of cryptocurrencies are the result of the altcoin season.
All the cryptocurrencies other than Bitcoin (BTC) are generally defined as altcoins. They offer a wide range of unique features and functionalities, and try to improve the existing limitations of Bitcoin. The transaction speed, scalability, and capability to execute smart contracts are some of the current limitations of BTC. Altcoins have been addressing these limitations and trying to improve them in its ways. Altcoin season is a concept that is heavily connected with Bitcoin and altcoins. An altcoin season, also known as altseason, is a time period in the cryptocurrency market where the value of altcoins increases and surpasses the price of Bitcoin. Altcoin Season generally occurs once a Bitcoin rally is over, and the investors shift their focus from Bitcoin to other altcoins. This article explains the altseason concept and its related information.
What is Bitcoin and Altcoin?
Having a clear understanding of Bitcoin and altcoin is better and much needed when you study altseason. Bitcoin is a name that doesn’t require any additional introduction, everyone might know what bitcoin is and how valuable it is. However, let us check what Bitcoin and altcoin are.
Bitcoin
Bitcoin(BTC) is the world’s first cryptocurrency created by Satoshi Nakamoto, the pseudonym of the person or group who introduced the technology. The digital currency allows users to facilitate peer-to-peer transactions in a decentralized manner. Bitcoin is the most valuable cryptocurrency in the world, and it is currently trading at $92,461 at the time of writing.
Altcoin
Altcoins are generally defined as all cryptocurrencies other than Bitcoin, some people also exclude Ethereum (ETH) while defining altcoins. Thousands of altcoins are available in the crypto market; these types of tokens are created to address and improve the limitations of Bitcoin. Altcoins have diverse characteristics and utilities that make them significant in the crypto arena. Altcoins can act as utility tokens, asset-backed tokens, governance tokens, etc. Market volatility is a notable factor of altcoins; they are highly volatile, and their prices will fluctuate significantly.
What is an Altcoin Season?
Altcoin season, which is also known as altseason, refers to a time interval in the cryptocurrency market where the altcoin prices increase and outrun Bitcoin’s price. During this period, investors find altcoins a better investment instead of Bitcoin; this trend normally occurs after a Bitcoin rally when the active traders and investors shift their focus from BTC to other cryptocurrencies. This phenomenon happens when Bitcoin’s dominance in the market weakens, and investors explore other options, like in-demand altcoins.
A notable increase in the altcoins’ value was clearly visible in the previous altcoin seasons. Some of the altcoins achieved a significant rise in their values during the previous altcoin seasons recorded in 2017-2018 and 2020-2021. The 2017-2018 altcoin season was due to the dip in the dominance of the Bitcoin market, which occurred at the beginning of 2018. Altcoins like ETH, XRP, ADA, and LTC managed to display a notable spike in the market capitalization during that time.
The last altcoin season was in 2020-2021, which occurred during the Coronavirus pandemic that shook the world. During this time, investors tried to explore cryptocurrencies beyond BTC, and that led to the enhanced market performance of altcoins and ultimately an altcoin season. Altcoins like ETH, SHIB, SOL, and AVAX performed well during the time and reaped a significant financial return as well.
Major Characteristics of Altcoin Season
Altcoin season is a golden period for cryptocurrencies other than Bitcoin. All the factors will fuel the altcoins and enhance their market performance during this period. Let us look at the characteristics of the altcoin season.
Altcoin’s enhanced market performance
The market performance of altcoins is a notable characteristic during this period. The performance of altcoins will be enhanced, and they are able to outperform Bitcoin in terms of price appreciation and trading volume. The improved trading activities and volume indicate the altcoin season is underway. In this season, altcoins will display higher returns than Bitcoins.
Decline of Bitcoin dominance
During this period, the market dominance of Bitcoin will decrease. This decline can be due to several reasons, including shifts in investor sentiment toward altcoins, market volatility, altcoins’ enhanced market performance, macroeconomic factors like inflation, geopolitical concerns, etc. Bitcoin has a limited supply, so its demand is subject to fluctuating with a small margin of shifts in several market conditions and investor sentiments.
Investor interest in Altcoins
During the altseason, investors find that altcoins have better capability to deliver higher returns, and it fuels the investors and forces them to shift their attention and capital to alternatives to Bitcoin. During this time, altcoins will have significant hype, and many innovative projects will flourish, and then the investors try to capitalize on this hype surrounding the projects to gain a significant financial return.
How to identify an altcoin season
Identifying and acting immediately is a key move that you should make if you are taking the altcoin season seriously. Identifying an altcoin season is not an easy task, it requires a comprehensive understanding of the market trends and cycles. An altcoin season index is available for you to check whether we are in an altseason, but the major concern regarding using these types of indexes is that they are reactionary. If you are dependent only on the altcoin season index, then you will be too late to enter an altseason, because by the time these indicators show the stats of the altcoin season, you will lose access to altcoins at good prices.
A clear rise and visible dominance of altcoin is the prime factor that indicates an altcoin season. During the altcoin season, an explicit dominance of cryptocurrencies except Bitcoin can be seen in the market. Significant spikes in trading volumes for various altcoins indicate the potential beginning of an altseason. Investors can analyze the variations of altcoins’ trading volume to identify if they are in the altcoin season. A combined use of the market indicators, like the altcoin season index and market components, like trading volume, will equip investors with the capability to identify the season and make adequate decisions at the time.
How to capitalize on altcoin season
Altcoin season, or altseason, is a good opportunity for traders to invest their capital in cryptocurrencies apart from Bitcoin to maximize their returns. Identifying and preparing for the lucrative opportunities that might come in the season is the inevitable step you should take at the specific time.
- Research more: Research is an important factor while entering the altseason. Take enough time to identify the best altcoins to invest in during altcoin season. Exploring various options and closely monitoring their market performance will help you make the best decision.
- Concentrate on multiple altcoins: Investors should try not to focus on a single altcoin. Instead, they should explore various altcoins and invest in different projects to mitigate the financial risks associated with the investment.
- Schedule your entry and exit points: Scheduling your entry and exit points is as important as selecting the altcoins you invest in. Monitor the market performance and use technical instruments like the relative strength index(RSI) to find the appropriate entry and exit points for you. Using these indicators in your investment journey will help you during special time periods, like altseason.
Read More: The Bitcoin Power Law – Everything You Need To Know
The Bottom Line
Altcoin season is neither a guaranteed phenomenon nor an assured event. It is purely based on the existing market conditions, market psychology, and the decrease in Bitcoin’s market dominance. At the moment, Bitcoin’s dominance is reported at 60% and has been showing a bearish trend in the cryptocurrency market. This dominant market performance could be an indicator of a future altcoin season when the altcoins outrun the BTC. Crypto is a fastly moving sphere; anything can happen there at any moment. One minute, SHIB might be facing a huge market dip and in a bearish movement, and its price might be skyrocketing in the next moment after Elon Musk tweeted about a particular Japanese hunting dog. So, paying close attention to the market and grabbing the opportunity to purchase altcoins during the altseason is the best you can do.