Sunday, April 21, 2024

What Is An Altcoin Season?

Without any doubt, “Altcoin season” is one of those slangs you would come across in the crypto space. And if you are new to crypto investment, this might sound strange to you. Well, before we go ahead, you should know that if you will be diversifying your portfolio and venture into investing in some other cryptos aside from Bitcoin, you would need to have a good understanding of the term.

Understanding what an altcoin season is and when we are in one will help you make the most of it, and make a huge profit from it. So, in this post, we will be showing you what altcoin season really is and how you can tell when one is close.

What Is An Altcoin Season?

Altcoin season is a time in the crypto market when altcoins tend to be outperforming Bitcoin. During this time, Bitcoin tends to lose its dominance in the market while altcoins gain more ground in terms of market capitalization.

Before the season, there is a spike in Bitcoin’s price which is eventually followed by a drop, giving an advantage to other cryptocurrencies to take over the market. One major and unique way to determine if we are in an altcoin season is to consider the Altcoin Season Index. This is a unique tool created by the Blockchain Center for that purpose.

The tool says we are in an altcoin season when 75% of the top 50 altcoins are doing better than Bitcoin in terms of market capitalization during the last 90 days. Well, if we are to go by that, then we can say we are currently not in an altcoin season because we are still below 75%… but we might be close to one.

What Are Even Altcoins, to Begin With?

Now, we know what an altcoin season is, but what if we don’t even know what altcoins are. Yes, that is possible, especially with some new investors in the crypto space. So, let’s quickly run over what altcoins are before we talk about what causes altcoin seasons and how to spot an upcoming one.

Altcoins is a short form of alternative coins, and it’s used to refer to any other crypto aside from Bitcoin. There are a lot of them in the market presently. And every time, more are added to the existing list.

The most popular altcoin is currently Ethereum. Although it is an altcoin, it has a market cap that is half of that of Bitcoin. However, Ethereum is not the only popular altcoin that is. Here are the top 10 altcoins as registered by CoinMarketCap as of the time of this writing:

  • Ethereum (ETH)
  • Cardano (ADA)
  • Binance Coin (BNB)
  • Solana (SOL)
  • XRP (XRP)
  • USD Coin (USDC)
  • Polkadot (DOT)
  • Dogecoin (DOGE).

What Causes Altcoin Seasons?

Well, it might be difficult to precisely tell what causes an altcoin season. But the generally-accepted idea is that it happens after a Bitcoin bull-run when investors tend to divert their gains from BTC into smaller altcoins to make more gains. This hence causes the price of BTC to fall while that of various altcoins to go up.

Nevertheless, that is not the only thing that could cause an Altcoin season. There are many more reasons it happens. We are going to be talking about a few of them later in this post, as well as how you can recognize when the next altcoin season is close.

What About the Previous Altcoin Seasons?

You might be wondering if an altcoin season has ever happened before, and when was the last time it did. Well, the first and the most memorable altcoin season was in 2017, shortly after the Bitcoin bull-run. That was also the time many altcoins were launched into the market, riding on the new functionality of Ethereum – smart contracts.

Another altcoin season happened in 2018, and also in 2020. So, how can you tell when the next altcoin season will be upon us? Let’s below are some indicators to consider.

5 Indicators to Know When an Altcoin Season Is Coming

#1: Increase in Altcoin Season Index

Like we earlier said, when the index shows that 75% of the top 50 altcoins are outperforming Bitcoin in the last three months, then we are in an altcoin season. But presently, the index is lower than 75%, meaning we are currently not in an altcoin season.

#2: Bitcoin bull-run

A great optimism around Bitcoin which leads to a spike in its price is also another indicator that an altcoin season might soon be upon us. An increase in BTC price often invites more investors into the market. While many of them will make a profit from Bitcoin, many will also like to put their investment in other smaller altcoins. And this, most times, results in Bitcoin losing its dominance in the market.

#3: New trends in the market

The inflow of new trends can also drive altcoin seasons. When new coins and tokens are introduced, they threaten the dominance of Bitcoin and sometimes cause it to lose its hold on the market. A good example is an introduction of decentralized finance (DeFi) and non-fungible tokens (NFTs).

The two drove the popularity of some altcoins in 2020, and that led to a sharp increase in the price of such coins, such as Ethereum and Binance Coins.

#4: When altcoin’s market price increases

Another way to tell if an altcoin season is close is an increase in the price or market cap of some altcoins. For instance, when some popular altcoins such as Ethereum (ETH), Ripple (XRP), and Binance Coin (BNB) increase in price, chances are that the profits made from such coins can be invested in some other altcoins. That could mean the beginning of an altcoin season.

#5: Trading predictions tending more towards altcoins

It is common to see traders making more predictions on altcoin trading pairs over BTC pairs during an altcoin season. When you notice that, it means we are in an altcoin season. At the same time. You might begin to see prediction expiration dates growing shorter “mid-season.” This happens as more crypto comrades are out looking for quick gains.

How to Make Money During An Altcoin Season

Whether you are selling your coin or buying more coins during the altcoin season, the most important thing is that you have a solid plan to make the most out of it and make more money. Below are some tips to help you achieve that:

  • Prepare for it: the best way to make money from an altcoin season is to be prepared for it before it comes. You only need to conduct your research to know when the next altcoin season would be.
  • Pay attention to technical indicators: one of the ways to appropriately prepare for an altcoin season is to pay attention to reliable signals and indicators. Such an indicator can help you identify the right altcoins to invest in before the season eventually comes.
  • Buy more altcoins before the season: invest in more altcoins before the altcoin season kicks off or shortly after it does. Then you can sell them later for a profit
  • Don’t be greedy: greediness can make you lose your money instead of gain some during an altcoin season. Don’t buy any coin when the price is out of the roof thinking it will continue to rise. That may not be the best time to buy because most times, every coin that goes up would eventually come down.

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