Altseason is a period of face-melting gains and high volatility. Some traders refer to it as the crypto Christmas. Within a short period (usually a few weeks to months), the price of an altcoin (any other cryptocurrency besides Bitcoin) rises steeply as investors channel their Bitcoin profits into these coins.
Once prices of major altcoins start to rise, the Fear of Missing Out (FOMO) plays its part, leading to a snowball effect on almost all altcoins. This drives their prices to astronomical and somehow overvalued levels for a few weeks or months. At this moment, many crypto enthusiasts are using the altcoin investing strategy.
This article discusses the factors behind an Alt season, the impact of Bitcoin correction on the crypto market, and when to wait for the Altseason.
The factors behind an Altseason
After Bitcoin experiences substantial price gains, it consolidates and cools off for some time. This makes crypto investors consider alternative coins (altcoins) to invest their Bitcoin profits into. The process reduces the Bitcoin market share and increases the altcoin market capitalization.
What does a Bitcoin correction tell us?
Basically, a Bitcoin correction is when the Bitcoin price drops after hitting a recent high. Bitcoin has experienced multiple price corrections since its launch in 2009. For instance, there were price corrections of 94% in 2011 and 84% in 2017. Besides, the crypto market has been endlessly experiencing “regular,” minor Bitcoin corrections in the last 12 years.
Technically, a Bitcoin correction tells us that the asset was overhyped and overpriced; hence, rediscovering its right market price. Identifying the beginning and end of a Bitcoin correction presents multiple opportunities for picking the right altcoins to invest in. For seasoned traders, this is the time of analyzing potential gems that can do 100 to 1000x.
Typically, Alt season starts when alts outperform Bitcoin and ends when Bitcoin outperforms them. Previous bull cycles have generally had Bitcoin assume an upward trend before alts ride on the positive market sentiments and hit new all-time highs.
Nevertheless, this does not directly imply that altcoins automatically rise in value when a Bitcoin correction takes place. As a matter of fact, Bitcoin bulls have lifted alts, and Bitcoin bears have negatively affected altcoins on numerous occasions.
When is the Altcoin season?
The easiest way of altcoin prediction is by studying Bitcoin’s dominance. So, what is Bitcoin dominance? Bitcoin dominance is the percentage of the entire crypto market share that Bitcoin accounts for. What is the relationship between Bitcoin dominance and Altseasons?
An Altseason starts during a significant reduction in Bitcoin dominance from the graph above. The left side of the graph shows that on 09/12/2017, Bitcoin dominance had reduced from 69 to 37 within 35 days. When you closely look at the right side of the graph, you realize December 9 corresponds with the start of the famous 2017 Altseason.
The cycle happened again on 30/03/2018 – there is a sharp decline in Bitcoin dominance, from 50 to 38 within 40 days. The alts market cap increases significantly, triggering another Altseason. From the above observations, we can say that when Bitcoin dominance drops significantly, it causes a rise in investments in alternative coins.
How can we explain this phenomenon better?
Basically, the law of supply and demand is at play! A decline in Bitcoin dominance results from Bitcoin sales by some investors. Therefore, investors either sell Bitcoin for fiat or altcoins when this takes place. The flow of capital from Bitcoin to altcoins triggers an Altseason.
As mentioned earlier, FOMO also plays a significant role in skyrocketing the prices of alts. When crypto enthusiasts discover an Altseason has started, they inject more capital into altcoins, leading to a snowball effect.
Most people are aware of the potential that low market-cap coins hold. That is why they invest more and more, causing exponential growth of those coins.
When is the next Altseason?
The current Bitcoin dominance is at 40% and indicates the formation of a descending triangle, which generally assumes a downward trend. We can find the target by locating the height of the triangle. If the pattern continues, then our target will be 31%. If Bitcoin dominance tests this level, expect another major Altseason like that of 2017.
Choosing your alts
“I have five million dollars in Bitcoin; which altcoin should I invest in?”
You have probably seen, or you will see, such questions on social media soon. The best way of diversifying your altcoin selection is to ensure that you have big winners in your portfolio. Big winners are those coins with massive potential from a technical viewpoint. In layman’s language, select coins with bullish charts.
But as we always say, the crypto market is quite volatile. Therefore, DYOR before investing in any cryptocurrency.
Conclusion about crypto Altseason
The golden rule of investing in any stock market is buying low and selling high. Thus, whether you are a seasoned or first-time trader, the best time to fill your bag is during a Bitcoin correction. It is still unclear whether Bitcoin has flipped to the bearish or will continue consolidating and retaking a bullish trend. But remember, a sharp decline in Bitcoin dominance indicates a looming Altseason.
The term “altcoin season” refers to the period of time when other cryptocurrencies surpass the market leader Bitcoin. Any cryptocurrency that isn’t Bitcoin is referred to as an altcoin or alternative coin.
A 90-day period is considered an altcoin season when 75% of all cryptocurrencies outperform Bitcoin. On the other side, the market is experiencing a Bitcoin season if Bitcoin outperforms more than 25% of all altcoins.
Investors have seen the Fed’s moves as a hint that the altcoin season is beginning after the previous week’s strong cryptocurrency price activity. Due to this, we anticipate Bitcoin (BTC-USD) and numerous cryptocurrencies will trade positively until the next FOMC meeting on September 20, 2022. If you are reading this after September 2022, DYOR.
During the Altseason the cryptocurrency cycle changes, as many altcoins (other coins than Bitcoin) skyrocket in their price. This happens to many alternative digital currencies at once.