What is Crypto Altcoin Season?

Over the years, Altcoin Season has become somewhat of a phenomenon amongst crypto traders and investors. This term refers to a period of time when the prices of altcoins experience a surge in price and market activity, and tend to outperform Bitcoin (BTC). For many traders, this season is when the crypto market is most volatile and exciting, as huge returns can potentially be made.

In this comprehensive guide, we will dive deep into understanding what Altcoin Season is, its causes, and how you can identify when it's starting. 

Key Takeaways

- Altcoin Season, or Alt Season, refers to a period of time when alternative cryptocurrencies (altcoins) outperform Bitcoin

- Altcoin Season is driven by various factors, such as market cycles, investor sentiment, and technological advancements

- Monitoring market indicators, social media trends, and Bitcoin dominance can help identify the onset of Altcoin Season

- Coinstash provides a secure and user-friendly platform to buy, sell, and trade a wide range of over 1,000+ altcoins

What is an Altcoin?

The term ‘altcoin’ is short for ‘alternative coin’, and refers to any cryptocurrency other than Bitcoin (BTC). 

It is somewhat of a legacy term that has persisted amongst crypto enthusiasts. It has its origins in the early beginnings of the crypto industry, when there was only Bitcoin (BTC) and a few other cryptocurrencies available on the market. As the world’s first and largest cryptocurrency, Bitcoin was considered the market leader and the only one that mattered for many crypto OG’s. Therefore, any non-Bitcoin cryptocurrencies were referred to as alternative coins..

Since these early days, thousands of other cryptocurrencies have emerged, each with its own unique features and use cases that build on the original work of Bitcoin. Some popular altcoins include Ethereum (ETH), Cardano (ADA), Binance Token (BNB), Dogecoin (DOGE) and Ripple (XRP). These digital currencies offer more than just an alternative to Bitcoin; they also bring innovative blockchain solutions to various problems in the financial and technological sectors. 

The growth and innovation of the crypto space has led to many crypto advocates questioning the relevance of the term altcoin, as many cryptocurrencies like ETH have eaten into the market share of Bitcoin over time. However, despite the debate, the term altcoin is still commonly used amongst traders and investors as a catch-all term for any crypto asset that is not Bitcoin. 

What is Altcoin Season? 

Altcoin Season, or Alt Season, refers to a period of time in the cryptocurrency market when altcoins experience significant price increases, often outpacing Bitcoin's (BTC) gains.

During this time, crypto traders and investors turn their attention towards alternative cryptocurrencies, seeking to capitalise on their volatility and high growth potential. The Altcoin Season typically coincides with a decrease in Bitcoin's market dominance, as more capital and trading volume flows into altcoins.

Bitcoin dominance is a key metric which illustrates the percentage that Bitcoin makes up of the total cryptocurrency market capitalisation. In other words, it measures the market share of Bitcoin relative to other cryptocurrencies. 

When Bitcoin dominance drops it generally indicates that capital has rotated into altcoins, and can sometimes signal the start of an Altcoin Season. Traders will often diversify their portfolio out across a range of altcoins, instead of BTC, fiat or Stablecoins, as altcoins tend to outperform Bitcoin during this period. 

For a more in-depth view, read our article: Bitcoin Dominance Explained

What Causes Altcoin Season?

There are several factors that contribute to the emergence of Altcoin Season and ignite the trend:

Market Cycle Capital Rotation: Historically, after a sustained uptrend in the price of BTC, price can often stabilise and consolidate within a tight range for extended periods. During this time, traders will often go further up the risk curve in search of short-term gains, by rotating out of Bitcoin into altcoins, potentially triggering an altcoin run. 

Innovation and new trends: The launch of new altcoin projects, innovations or updates to existing projects can often excite market participants and drive up demand. This is especially true if the innovation is novel and offers a unique solution to a problem not addressed elsewhere in the market. We have seen evidence of this previously with the advent of Decentralised Finance (DeFi) in 2021 and Non-fungible tokens (NFTs) in 2022 spurring their own new Altcoin Seasons. 

Bullish Macro Sentiment: A strong economy and bullish stock market can also influence the popularity of altcoins, as traders and investors generally have a greater appetite for risk. As a result, new investors will often move into smaller cap altcoins for the potential for higher returns, which can boost up the alt market cap and potentially lead to an altcoin season.  

How to Spot the Start of an Altcoin Season

Detecting the onset of Altcoin Season can be challenging, but historical data suggests that keeping an eye on the following key indicators may help:

Bitcoin Dominance: Monitor Bitcoin's market dominance, as a declining Bitcoin dominance may signal an upcoming Altcoin Season. Generally, after the market has witnessed a Bitcoin season or bull market, altcoins enjoy their own bull run. 

Altcoin Market Cap Increases: Observe changes in the crypto market capitalisation rankings of major altcoins. Generally, when major players like Ethereum (ETH) or Solana (SOL) enjoy upward price movement, profits can flow into other altcoin as well, potentially signaling the start of an Alt Season. 

New Blockchain Trends Emerge: Keep a close eye on social media and news platforms for buzz around specific altcoins, new blockchain technology or tech innovations as this can indicate the direction of the next Altcoin Season. As new crypto trends emerge, the hype around altcoins associated with these trends can often follow suit. A recent example of this is the launch of ChatGPT3 in late 2022 and the surge in interest in AI related cryptocurrencies in the months that followed.  

Altcoin Season Investment Considerations

Investing during Altcoin Season may be rewarding, but it's essential to consider several factors before diving in. Here are some key investment considerations to keep in mind:

Risk tolerance: Altcoins can be more volatile than established cryptocurrencies like Bitcoin, leading to potentially higher returns but also increased risk. Ensure that your risk tolerance aligns with the level of volatility you may encounter during Altcoin Season.

Diversification: To mitigate risk, consider diversifying your investments across multiple altcoins with varying market capitalisations, sectors, and use cases. This approach can help spread the risk and potentially increase your chances of capturing gains from different coins.

Market timing: While it's challenging to time the market accurately, keeping a close eye on market indicators and trends can provide valuable insights into when Altcoin Season is approaching. Be prepared to act quickly, as the market is subject to change without warning. 

DYOR: Conduct your own research on each altcoin you're considering investing in, including its fundamentals, team, partnerships, and real-world use cases. This will help you make more informed investment decisions and identify high-potential projects.

Long-term vs. short-term: Determine whether you plan to hold your altcoin investments for the long term or capitalise on short-term gains during an altcoin rally. Each approach comes with its own set of risks and rewards, so choose the strategy that aligns with your investment goals.

Recommended Reading: Crypto Market Cycles Explained

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