Altcoin season is upon us. Or not? What is altcoin season and how do we know it is coming?
Factors such as investor sentiment, new product launches, and international economic conditions cause the cryptocurrency market to go through periodic ups and downs. The "altcoin season," in which cryptocurrencies other than Bitcoin experience spectacular price increases, is one of the most fascinating times.
Not only are these times thrilling for traders, but they also signal major changes in the market's dynamics.
The stabilization of Bitcoin and the maturation of altcoin projects interact to create altcoin seasons. They stand for the variety of cryptocurrencies and the innovation and practicality that altcoins offer. During previous altcoin booms, factors such as Ethereum's smart contracts, Cardano's emphasis on sustainability, and Solana's scalability all played a role in generating market enthusiasm.
Because of their track record of profitability, market participants eagerly await these seasons. The top 100 altcoins in 2021 had returns that exceeded Bitcoin's performance, with an average return of over 300%, according to data from that season. If investors are aware of the telltale signals of an upcoming altcoin season, they will be better prepared to take advantage of opportunities while minimizing risks.
What Is Altcoin Season?
If altcoins do much better than Bitcoin during a certain time period, that time is called "altseason." Bitcoin has been the most famous cryptocurrency for a long time, but altcoins show how blockchain can be used for more and more different things, from decentralized finance (DeFi) to non-fungible tokens (NFTs) and more.
Historically, altcoin seasons have followed patterns that can be predicted within the larger crypto cycle.
As an example, after Bitcoin hit a high point of almost $20,000 in early 2018, other cryptocurrencies like Ripple (XRP) went through the roof. XRP's market cap reached over $120 billion.
Similarly, altcoins like Cardano and Binance Coin saw gains of 500% and 600% in 2021, when Bitcoin's price leveled off after hitting $64,000.
The way the market moves during altcoin seasons depends on how investors feel.
Traders are looking for assets with higher growth potential as Bitcoin's price stays the same or goes in a straight line. Altcoins become appealing alternatives when they are undervalued compared to Bitcoin.
Altcoin projects that add new features, like Layer 2 solutions or interoperability protocols, also make them more popular.
Altcoin seasons can bring big rewards, but they also bring bigger risks.
When compared to Bitcoin, altcoins tend to be more volatile. In 2022, many altcoins lost more than 80% of their value from their high points. To make the most of these chances, it's important to know how to spot the signs of an altcoin season.
10 Signs of Altcoin Season
Let’s analyze the signs of impending altcoin season one by one.
Decline in Bitcoin Dominance
Bitcoin dominance is the amount of the total value of the cryptocurrency market that is attributed to Bitcoin.
A clear drop in Bitcoin's popularity is a key sign that altcoin season is coming. In the past, when Bitcoin's market share drops below 50%, it usually means that people are moving their money toward altcoins. That's why this is the most important sign to look out for.
During previous altcoin seasons, Bitcoin's dominance dropped a lot as money poured into other cryptocurrencies. This trend shows that investors are spreading out their holdings to get better returns from altcoins.
Surge in Altcoin Market Capitalization
Here is another significant sign of the altseason.
An increase in the total market capitalization of altcoins indicates growing investor interest and capital inflow into these assets.
For example, in November 2024, the total market capitalization of altcoins surged by 35%, nearing $1.13 trillion, as investors began to shift capital toward altcoins.
This surge in market capitalization often precedes or coincides with an altcoin season, as it reflects increased demand and investment in alternative cryptocurrencies.
Increased Trading Volume in Altcoins
A significant rise in trading volumes for altcoins is another indicator of an approaching altcoin season.
Increased trading activity suggests heightened investor interest and speculation in these assets. Just remember the recent market rally, when weekly altcoin trading volume rose past $100 billion, the highest level since March. It’s a clear sign that investors are flocking to altcoins.
One easy way to follow the updates here is to monitor trading volumes. They can provide insights into market sentiment and the potential for an altcoin season. And also high trading volumes often accompany price surges, indicating strong investor engagement.
Positive Developments in Major Altcoins
Seasoned traders often pay attention to this one, so should you.
Technological advancements and strategic partnerships within major altcoin projects often serve as catalysts for market growth, signaling the onset of an altcoin season.
These developments enhance the utility and appeal of altcoins, attracting increased investor interest and capital inflow.
A notable example is Ethereum’s transition to a Proof-of-Stake consensus mechanism, known as Ethereum 2.0. This upgrade aims to improve scalability, security, and energy efficiency. Since the announcement of Ethereum 2.0, ETH has experienced significant price appreciation, reflecting growing investor confidence in its long-term viability.
Similarly, Solana has gained attention due to its high-performance blockchain capable of processing thousands of transactions per second. Solana’s ecosystem has expanded rapidly, with numerous dApps and projects choosing its platform for development. This growth has contributed to a substantial increase in SOL’s market capitalization.
Cardano has also made significant strides with the implementation of smart contract functionality through its Alonzo upgrade. This enhancement enables developers to build decentralized applications on the Cardano blockchain, positioning it as a competitor to Ethereum in the dApp space. Following the Alonzo upgrade, ADA’s price saw notable gains, indicating positive market reception.
These examples illustrate how positive developments in major altcoin projects can act as precursors to an altcoin season.
You should start your day with news. Monitoring technological advancements, partnerships, and ecosystem growth within altcoin projects, can bring you all the updates you need.
Decline in Stablecoin Dominance
How in the world are stablecoins linked with the altcoin seasons? Glad you asked.
A decrease in the dominance of stablecoins, such as USDT and USDC, often signals a shift in investor sentiment from risk-averse assets to more volatile cryptocurrencies, including altcoins.
Stablecoins are typically used by investors to hedge against market volatility or to hold funds without exiting the crypto ecosystem.
So when investors are spending their USDT holdings on some other coins, it’s sign.
A reduction in stablecoin dominance suggests that investors are reallocating capital into assets with higher risk and potential returns.
Recent data indicates a decline in stablecoin dominance. For instance, if USDT’s market capitalization suddenly declines by $3 billion, it means that there was a shift of approximately $3 billion into other cryptocurrencies.
This trend is significant because it indicates growing investor confidence in the broader cryptocurrency market, leading to increased investments in altcoins. Historically, such shifts have preceded altcoin seasons, where alternative cryptocurrencies outperform Bitcoin.
So don’t neglect this kind of monitoring also. Watching stablecoin dominance can provide valuable insights into market sentiment and potential upcoming trends in the crypto space.
Strengthening of the ETH/BTC Ratio
Bitcoin is strong. But Ethereum, the leader of altcoins pack, sometimes gets really powerfull, too.
The ETH/BTC ratio measures Ethereum’s value relative to Bitcoin.
A rising ratio indicates Ethereum’s outperformance against Bitcoin, often signaling increased investor confidence in altcoins. Historically, a strengthening ETH/BTC ratio has preceded altcoin seasons, where alternative cryptocurrencies experience significant gains.
Yes, there are active discussions about Ethereum’s future, some experts even say Solana is about to flip Ethereum, but still ETH is the leading altcoin you would want to watch.
As of November 2024, the ETH/BTC ratio has risen to 0.085, up from 0.075 in September 2024. This 13% increase over two months suggests a growing preference for Ethereum over Bitcoin among investors.
Emergence of New Trends and Projects
The emergence of DeFi and NFTs has previously led to increased interest in related altcoins.
For instance, the rise of DeFi platforms has significantly impacted the altcoin market. Projects like Uniswap (UNI) and Aave (AAVE) have introduced decentralized trading and lending, attracting substantial investment. Let’s take a look at what happened in the previous market cycle. Uniswap’s trading volume surpassed $100 billion in 2021, highlighting the growing interest in DeFi platforms. Similarly, Aave’s total value locked (TVL) reached over $20 billion in the same year, indicating significant capital inflow into DeFi projects.
This cycle will be heavily influenced by AI tokens.
There is a notable trend: the integration of artificial intelligence (AI) with blockchain technology. Projects like SingularityNET (AGIX) aim to create decentralized AI marketplaces, allowing developers to share and monetize AI technologies.
The potential of AI in blockchain has attracted investor interest, contributing to the growth of altcoins associated with this trend. And this is just a beginning for AI coins.
The gaming industry has also embraced blockchain technology, leading to the development of play-to-earn (P2E) games. Axie Infinity (AXS) is a prime example, where players earn tokens through gameplay. Axie Infinity’s revenue exceeded $1 billion in 2021, demonstrating the significant impact of blockchain-based gaming on the altcoin market.
Positive Market Sentiment and Media Coverage
Market sentiment and media coverage play crucial roles in the cryptocurrency market, particularly concerning altcoins. Is safe to say that media and opinion leaders can influence really serious market swings.
Positive sentiment and increased media attention can drive investor interest and capital inflow into altcoins. Sometimes to an extent potentially leading to an altcoin season.
For example, the rise of meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) was significantly influenced by social media and celebrity endorsements. Elon Musk’s tweets about Dogecoin contributed to its price surge, with the coin reaching a market capitalization of over $80 billion in May 2021.
Similarly, media coverage of Ethereum’s technological advancements, such as the transition to Ethereum 2.0, has positively impacted its market performance. Reports highlighting Ethereum’s scalability and energy efficiency improvements have attracted investor interest, contributing to its price appreciation. Recently a significant number of publications dedicated to Solana’s technical advancement have clearly led to SOL’s price surging.
The approval of Bitcoin and Ethereum ETFs has garnered significant media attention, leading to increased investor confidence in the cryptocurrency market.
The launch of these ETFs has provided regulated avenues for investment, attracting institutional investors and contributing to the growth of the altcoin market.
Positive market sentiment and media coverage can create a feedback loop, where increased attention leads to higher investment, further driving media interest.
This cycle can contribute to the onset of an altcoin season, as more investors become aware of and invest in alternative cryptocurrencies.
Regulatory Developments Favoring Altcoins
Regulatory developments play a pivotal role in shaping the cryptocurrency landscape, particularly concerning altcoins.
Favorable regulations can boost investor confidence, leading to increased capital inflow into alternative cryptocurrencies.
And on the contrary, stringent regulations may deter investment and stifle innovation.
In recent months, several regulatory advancements have signaled a more supportive environment for altcoins. For instance, the U.S. Securities and Exchange Commission (SEC) approved spot Ether (ETH) exchange-traded funds (ETFs) in early 2024, marking a significant milestone for Ethereum and the broader altcoin market. This approval has provided investors with a regulated avenue to gain exposure to Ethereum, potentially increasing its adoption and market liquidity.
Additionally, the United Kingdom has announced plans to introduce comprehensive crypto regulations, including those on stablecoins and staking, early next year. City Minister Tulip Siddiq emphasized the need for broader regulations to boost investor confidence and cement London’s position as a financial hub. The industry has welcomed this move. It’s a step toward strengthening the UK’s competitiveness in the crypto space.
These regulatory developments suggest a growing recognition of the importance of altcoins in the financial ecosystem.
Bitcoin is no longer the only force on the battleground. Altcoins are gaining momentum. What is it if not the beginning of the altcoin season?
Historical Patterns and Cyclical Trends
The cryptocurrency market is characterized by cyclical trends, often influenced by Bitcoin’s performance.
Historically, altcoin seasons have followed significant Bitcoin rallies, as investors seek higher returns in alternative cryptocurrencies once Bitcoin’s growth stabilizes.
Simply put, when Bitcoin’s bull run looses steam, investors start looking for other options. Altcoins are their usual next focus.
For example, after Bitcoin reached its all-time high in December 2017, many altcoins like Ethereum and Ripple soared over 1,000%. Investors moved into altcoins as Bitcoin stabilized, seeking higher returns.
Similarly, in early 2021, when Bitcoin broke its all-time high, altcoins like Solana and Avalanche soared by over 10,000%, fueled by investor enthusiasm and the rise of decentralized finance (DeFi) projects.
These historical patterns suggest that altcoin seasons are often preceded by Bitcoin reaching new highs, followed by a period of stabilization. Investors, anticipating the next phase of growth, diversify into altcoins, leading to significant price surges in these assets.
Final Thoughts
Understanding the signs of an impending altcoin season is critical for investors aiming to maximize returns.
Just as with Bitcoin’s bull run, you don’t want to miss the signs of altseason and miss all the opportunities it brings.
From tracking Bitcoin dominance to monitoring regulatory developments, staying informed about market dynamics can provide a strategic advantage. While the potential for high returns exists, it is essential to approach altcoin seasons with caution, given the inherent volatility of the cryptocurrency market.