Definition
Altseason is a brief period where money flows out of Bitcoin & into altcoins, resulting in a significant & rapid price increase for the majority of cryptocurrencies.
Understanding Altseason
Altcoin season, or ‘Altseason’, is a period of increased volatility in the crypto market, where altcoins experience significant price movements relative to Bitcoin.
Within a brief period (usually a few weeks or months), the prices of altcoins (all coins besides Bitcoin) skyrocket as market participants shift their funds from Bitcoin into other cryptocurrencies.
Once prices start to rise, FOMO takes over, creating a snowball effect that pushes altcoin prices even higher to astronomical (and often overvalued) levels for a short period of time.
Altseason is known for rapid price fluctuations, with some altcoins experiencing large movements in short periods. However, predicting market cycles remains uncertain, and past trends do not guarantee future outcomes.
What causes an Altseason?
Often, after Bitcoin experiences an exponential price movement, it consolidates and moves sideways for a while. This leads market participants to seek other opportunities. They typically exchange Bitcoin for Ethereum and other emerging altcoins, reducing Bitcoin’s share of the total crypto market and triggering an Altseason.
Bitcoins & Altseason
Put simply, Altseason begins when altcoins start to outperform Bitcoin (when prices of alts rise in comparison to Bitcoin), and Altseason ends when Bitcoin outperforms altcoins.
However, this does not mean that when Bitcoin’s price goes down alts automatically go up. In fact, historically, Bitcoin has tended to lift altcoins when it rises and also bring them down after a major crash, with the price of Bitcoin and altcoins often being closely correlated. Previous bull markets have generally seen Bitcoin enjoy an uptrend before altcoins join the wave and head for the moon.
Key Takeaways
- An altcoin is simply any other cryptocurrency that is not Bitcoin. They are usually more volatile than Bitcoin, offering high-risk high-reward opportunities.
- When Bitcoin dominance (the amount of the total crypto market share held in Bitcoin) declines rapidly, it leads to an increase of investments in Altcoins, which causes an Altseason.
- Predicting Altseason is not an exact science, and it is not something that’s officially announced at a certain time or date.
- An Altseason can occur several times a year and they often happen within a relatively short period of time.
- Some traders choose to secure gains as prices rise during Altseason to manage risk, given the high volatility of altcoin prices. However, market timing is uncertain, and approaches vary based on individual risk preferences and strategies.
Understanding Market Trends During Altseason
Altseason is often associated with high volatility and increased trading activity. Some traders monitor price movements and historical trends, but market conditions can be unpredictable, and strategies vary widely.
Top tips for navigating Altseason
Altseason is often marked by increased trading activity and volatility, which some traders seek to capitalize on. However, it is also a period of high risk, and price trends can shift unpredictably. Here are some tips to keep in mind during an Altseason:
- Altseason is both an exciting and emotional time. If you’re new to the market, proceed with caution. Making decisions based on logic rather than emotions is a well-regarded approach to managing risk and navigating price fluctuations.
- Having a solid exit strategy prepared will decrease the chances of you HODLing your alts through the peak only to see them fall when Altseason comes to an end.
- Depending on your level of involvement, spreading yourself too thin across multiple altcoins can be overwhelming and difficult to manage. While diversification can be beneficial, it’s important to focus on a manageable number of assets to stay informed and make well-considered decisions.
- Accept that you cannot be involved in every pumping altcoin. Choose your best picks and stay up to date on the relevant news and market movements.
- Be sure to take profits on the way up to ensure that you realise most of your gains before prices come back down again. If you get a sizeable gain, you may want to reduce your position before the inevitable price correction!
- Some traders adjust their holdings between altcoins and Bitcoin based on market trends. However, prices are highly volatile, and strategies vary among market participants.
- Risk management is important during periods of high volatility, as price movements can be unpredictable. Some traders evaluate market trends and historical patterns to inform their approach, but outcomes remain uncertain.
- Altseason is often marked by rapid price increases in altcoins. Some traders monitor historical trends and market signals, but predicting market cycles remains uncertain.
What are the main reasons people buy altcoins?
- To increase their Bitcoin holdings – many market participants focus on accumulating as much Bitcoin as possible. This often involves shifting funds from Bitcoin into altcoins before Altseason begins, then exchanging those altcoins back for Bitcoin around the peak of Altseason.
- To hold for the long term – while many altcoins have yet to establish lasting value in the market, some may experience significant growth over time. Since market peaks are unpredictable, some traders choose to secure gains gradually during upswings. However, risk management strategies vary among individuals.
What is Bitcoin dominance?
Bitcoin Dominance is the percentage amount of the total crypto market share/cap (all the money in crypto) that belongs to Bitcoin. Basically, it represents how many people in the market are currently buying and holding Bitcoin compared to other altcoins.
Bitcoin Dominance increases when more people buy or simply hold Bitcoin. When traders sell Bitcoin for altcoins, Bitcoin Dominance falls, often causing an Altseason. You can find the Bitcoin Dominance chart here.
How does Bitcoin dominance relate to Altseason?
Bitcoin dominance is one of the key metrics traders use to know when to buy/sell their altcoins.
Market trends show that when Bitcoin dominance increases, some traders choose to reduce their altcoin holdings. However, decisions on asset allocation vary based on individual strategies and risk considerations.
Holding Altcoins at such a time would result in both a loss and a significant opportunity cost. Not only do you lose money holding altcoins when Bitcoin dominance is going up (money flowing into Bitcoin), but you also lose the opportunity to make money by holding Bitcoin as its price is rises.
What does it mean for Altseason when Bitcoin dominance decreases?
Bitcoin Dominance decreases when more and more people offload Bitcoin (usually by trading BTC for altcoins or fiat currency).
Historically, some traders have observed that Bitcoin dominance declines before altcoin price increases. However, market conditions change, and no strategy guarantees specific outcomes.
Generally, Altseasons have occurred in the past when Bitcoin dominance has had a decline, with the biggest Altseasons (when alts go to the absolute moon in a very short period of time) occurring when Bitcoin’s dominance has experienced the sharpest decline.
However, it is important to note that these two seasons are not black and white. There are still plenty of gains to be made in altcoins even when it isn’t an official ‘Altseason’, and with more money and interest flowing into the space than ever before, it is possible that future bull runs/Altseasons will diverge from past historical patterns.
How does Bitcoin’s actual price (not its dominance) affect the price of altcoins?
While past patterns have suggested that Bitcoin’s dominance and performance in relation to altcoins is a fairly reliable way to predict the start of Altseason, it does not mean that a rise in Bitcoin’s price means a decline in the price of altcoins.
In crypto, Bitcoin is king and if you zoom out you will see that Bitcoin’s price movements are usually closely correlated and followed by the rest of the market. In 2018, Bitcoin experienced a crash and all other cryptocurrencies followed suit shortly after. Usually, Bitcoin will undergo a big move to the upside and then the alt market will follow soon after.
What is the Altcoin Seasons Index?
The Altcoin Season Index is a helpful (but not exact) tool to see where we are in relation to Altseason. According to the Altcoin Season Index, if 75% of the Top 50 altcoins performed better than Bitcoin over the last season (90 days), it is Altcoin Season.
They also give an indication of where we are in terms of an Altcoin Month or Year, with an easy to interpret graph that shows the general long-term trends of previous Altseasons.
Altcoin season is not something that’s officially announced at a certain time or date. Nobody knows for sure when it’s upon us, nor when it will end. All we have are certain indicators that can help us know if we have entered Altseason.
Why does Altseason see such huge gains?
FOMO and the snowball effect play a significant role. One reason Altseason experiences such dramatic price surges is that many new market participants see prices rising and quickly jump in out of fear of missing out.
This creates a snowball effect which pushes prices higher and higher until they are overvalued and in a bubble. When people realise they are riding a precarious rollercoaster that may crash at any moment, they begin to sell. This causes panic which leads to more mass selling and the price plummeting back down to earth, bringing Altseason to an abrupt end.
When is the top of Altseason/the bull market?
The million-dollar question that no-one can really answer. While crypto markets follow cycles which can be predicted based on past market movements, every bull run is different and it is incredibly difficult predict the very top of Altseason, or any bull run for that matter.
Since no one can predict the exact peak of a bull run or Altseason, gradually securing gains as your portfolio increases in value can be a strategic approach. Dollar-cost averaging (DCA) when selling can help reduce the impact of market volatility while managing your holdings.
If Bitcoin’s price goes up will altcoins also go up?
Generally, yes. The price of most altcoins is highly correlated with the price of Bitcoin. It is Bitcoin dominance, however, that indicates when Altseason is beginning.
Why are altcoins dependent on Bitcoin?
A major reason that altcoin’s and Bitcoin’s prices are so highly correlated is that many altcoins are purchased with Bitcoin. Bitcoin is often bought before the purchase of an altcoin, pushing the price of both coins up.
Similarly, if someone wants to cash out on an altcoin, many exchanges require you to first sell that altcoin for Bitcoin, and then sell the Bitcoin for cash, which pushes both prices down at the same time.
Another reason the prices are highly correlated is simply because they’re in the same asset class and things that are in the same asset class tend to go up and down together.
What to look out for to predict an Altseason
The most important thing would be a decrease in Bitcoin dominance, usually occurring after an exponential increase and subsequent consolidation. Additionally, relative trade volume, social media activity, mainstream interest, new coin listings and the volume of news articles published from crypto projects seem to be good indicators of when Altseason might be approaching.
What is Ethereum’s relationship to Altseason?
Ethereum, seen as the second most trusted cryptocurrency and the silver to Bitcoin’s gold, is at the heart of the altcoin market. The start of bullish moves for Ethereum is often the start of Altseason, especially with so many alts and DeFi projects being built on top of the Ethereum Blockchain.
Generally, after Bitcoin rallies upwards and consolidates, Ether’s price will also need to break out before altcoins can see a sizable rally.
Can altcoins lift Bitcoin?
Not really. Bitcoin rarely gets boosted by altcoins.
Generally, once altcoins have pumped and claimed dominance from Bitcoin, the steps in to take back the bulk of the crypto market share, marking the end of Altseason.
What is an example of Bitcoin Dominance influencing Altseason?
On January 3, 2021, Bitcoin Dominance had fallen from 73% to 59% in just 30 days (meaning Bitcoin’s share of the total crypto market dropped significantly in just a month).
Looking at the Altcoin market cap chart, this sharp decline in Bitcoin Dominance coincided exactly with the beginning of one of the largest Altseasons of the 2020-2022 bull run. As Bitcoin’s dominance dropped, liquidity flowed into altcoins, driving major rallies across Ethereum, Binance Coin (BNB), Cardano (ADA), Solana (SOL), and meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB).
History repeated itself later in the cycle, when Bitcoin Dominance dropped from 48% to 40% between July and September 2021, leading to another altcoin surge, particularly in Layer 1 projects and NFTs, as Solana, Avalanche, and Terra saw explosive growth.
The pattern remains consistent: some traders monitor Bitcoin Dominance as one of several indicators when analyzing market cycles. However, while historical trends show correlations, market conditions can vary in different cycles.
What have previous Altseasons and bull runs taught us?
Historical bull runs and Altseasons indicate that larger-cap altcoins, starting with Ethereum, tend to rise before smaller-cap altcoins gain momentum. This typically occurs after Bitcoin experiences a significant upward move, followed by a period of sideways movement, prompting market participants to explore altcoins. As a result, Bitcoin dominance decreases, setting the stage for Altseason.
What is the Bitcoin Rainbow chart?
The Rainbow Chart is intended to be a fun way of looking at long term price movements and disregarding the noise of daily volatility. While this chart is far from an exact science, it gives a helpful overview of long-term price patterns and where we seem to be in the current cycle.
