Cryptocurrencies have become a popular investment option for many people over the years, they’ve become pretty much mainstream already and with that, the concept of "altcoins" has also become more prevalent. Altcoins are alternative cryptocurrencies that are not Bitcoin, and while they may not have the same market capitalization or name recognition as Bitcoin, they can still be valuable investments in their own right.
In fact, you might have seen plenty of posts on social media that go something like this:
“Bitcoin will not make you rich, altcoins will”
or maybe: “Bitcoin can double your money, but altcoins will make you a millionaire”.
There are all kinds of reiterations of this statement, I don’t need to show you too many of these, I’m sure you get the point. What this means, is that Bitcoin has already become too expensive and even though its price continues to go up, it does it in much more restrained fashion, compared to altcoins, that sometimes can jump 100x, 1000x, even 10,000x, during a bull market. And that’s true.
For instance: the memecoin - Shiba Inu - a technically useless token, created on the back of the hype surrounding another memecoin Doge, which is favoured by Elon Musk. The media attention that Doge gained gave birth of plenty of other memecoins and Shiba Inu is just one of these. It was launched in 2021, during the peak of the last bull market and delivered one of the greatest returns in financial market history, soaring by 43,800,000%. A perfectly timed investment of just $10 in that year would've turned into more than $4 million. Astounding, right? Please, don’t rush into buying Shiba now, this is not what I’m saying - that ship has sailed.
This is just one example of how some altcoins can go to unthinkable levels purely on the back of hype and successful marketing.
Shiba to this day is just a memecoin with no use case and a bunch of promised upcoming upgrades that could turn it into a coin with utility, but that’s not yet materialized. Its price went down by 95% during the bear cycle last year and it’s recovering slowly but it’s still 87% down from its ATH - so this is by no means a call to buy Shiba.
And since I mentioned Doge, the mother of all memecoins - launched in 2013 - way before most of us had any interest in crypto - it is another great example of altcoins success stories - despite zero utility. During the bull market of 2021 Doge famously won the affection of the world’s richest man Elon Musk, who through numerous tweets managed to pump its price by more than 21,000% - the token jumped from around 1 cent of a dollar, to a whopping 73 cents at its peak in May 2021.
It was the biggest success story for many tiktokers back then, people were posting immense gains back then. Sadly, these were mostly noobs who didn’t know how to capitalize on these gains and as the hype subsided, they just watched their millions melt away - the coin is 88% down from its ATH and that’s been the case for over a year now. Most of these TikTokers didn’t sell because they were waiting for $1 price tag or even $10.. whatever they were told - which is not how you play this game. They could have sold at 70 cents, or even 60 cents, or 50 cents would have been a wise move. The coin is 8 cents today. Why wait when you can sell high and buy low again. Or even better - buy something else that will perform better in the meantime.
Ok, so let’s talk about the phenomenon known as "altseason" and how to make the most of it.
First, what is an Altseason and how to know when it occurs?
Altcoin Season Defined
Altseason is a term used to describe a period of time in which altcoins experience a significant increase in value relative to Bitcoin - in other words, they outperform Bitcoin and they do it my a huge margin. During this time, investors shift their focus away from Bitcoin and towards altcoins, resulting in a surge in demand for altcoins and a subsequent increase in their prices.
Altseason usually occurs when Bitcoin is experiencing a period of consolidation or stagnation. During these times, investors may become impatient with Bitcoin and start looking for alternatives with better chances for higher returns. This can lead to increased demand for altcoins, which in turn drives up their prices. Consolidation for Bitcoin means that the price is moving mostly sideways - of course, it is never just flat, but the volatility is low, with small ups and downs, so mostly sideways. If Bitcoin is making bigger moves, money will either stay in Bitcoin or it will go into stablecoins - during big drops, so in this case, altcoins are not likely to boom. For a true altseason, we need Bitcoin to stay relatively stable for a while.
How to Identify Altcoin Season?
So, how can you identify when altcoin season is occurring? There are a few key indicators to look for:
Bitcoin dominance: Bitcoin dominance refers to the percentage of the overall cryptocurrency market that is made up of Bitcoin. When Bitcoin dominance is high, it generally means that investors are more focused on Bitcoin than altcoins. Conversely, when Bitcoin dominance is low, it may indicate that investors are shifting their focus to altcoins.
Altcoin market cap: Another indicator of altcoin season is the market capitalization of altcoins. When altcoin market cap is rising rapidly, it may be a sign that investors are pouring money into altcoins and that altcoin season is in full swing.
Social media activity: Finally, social media activity can also be a good indicator of altcoin season. If there is a lot of buzz and excitement surrounding certain altcoins on social media platforms, it may be a sign that investors are becoming more interested in those coins and that altcoin season is underway.
Lastly, here’s one very useful tool - the tokenmetrics AI powered tool that shows us when we’re in Altseason or Bitcoin season. It’s a tool they released just over a year ago, and it’s so simple. I use token metrics a lot as they have so many tools and metrics that help me in my market analysis and this is a free one, so make use of it. My invite link is in the description below, so get it from there. As you see, right now we’re deep in the Bitcoin territory. We dropped there on 8 March - which is when I exited all my altcoin positions as I don’t want to be a bagholder during these low periods for alts. This tool alone, can help you prevent major losses. As I said, why would you hold a token that is losing value when you can exit when its high and if you really want to have it in your portfolio, then buy it again when it’s low.
What to Do During an Altseason?
Here are a few tips:
Always remember that Altseason is not going to last for too long, so be prepared to sell when the market turns. Buying tokens during an altseason is too risky because you’re buying during a peak of the market, so you’re buying high. Depending on how long it lasts, you can see your tokens gain hundreds percentage points in value, be sure to sell during peaks or as soon as you see that they hit resistance and the price starts correcting. Don’t be a bagholder - it can take many months or even years for a token to ever reach its previous peak and some never do. Ideally, you want to enter during the early days of an Altseason and exit during its peak or at least in the early days of the subsequent downtrend. A downtrend always follows.
Keep an eye on Bitcoin's dominance: Bitcoin's dominance tends to decrease during altcoin season, which means that altcoins have more room for growth. If you see the Bitcoin dominance bouncing back up, or any signs of a trend reversal, it can be your sell signal or at least an alert for it.
Diversify: While altcoin season can be a great opportunity to make money, it's important to remember that altcoins are generally riskier investments than Bitcoin. Therefore, it's a good idea to diversify your portfolio across a range of altcoins rather than putting all your eggs in one basket. This can help you minimize risks and maximize returns.
Do your research: Before investing in any altcoins, be sure to do your research and look beyond the top cryptocurrencies: During altcoin season, many smaller, lesser-known altcoins may experience significant growth. Keep an eye on the market and identify emerging altcoins with strong potential. Sometimes we see shitcoins or memecoins - in other words, coins with bad fundamentals make quite a spash too - this is not uncommon, but it’s usually driven by hype and lots of social media promotion, so keep an eye on what people are talking about online. This can help spot a winner early on. This is very much a gamble though, it’s not everyone’s cup of tea.
Take advantage of market sentiment: Altcoin season can be influenced by market sentiment, so look for altcoins with positive sentiment, such as those with a strong community, active social media presence, or positive news coverage. Stay up-to-date with the latest news and market trends, and identify potential catalysts that could drive demand for certain altcoins. Look for altcoins with upcoming product releases, partnerships, or adoption by major institutions. One way to monitor what’s upcoming is the coinmarketpcap’s calendar page. There are other such websites too, this is just one of them.
Use technical analysis: Technical analysis can help you identify entry and exit points for altcoin trading. Look for price patterns, support and resistance levels, and use indicators such as moving averages and relative strength index (RSI), learn to use the Fibonacci retracement tool to be able to identify the most likely resistance or support levels - I use it all the time here on this channel when I do technical analysis, so even by just watching what I do, you can get the hang of it.
Practice risk management: Altcoin season can be volatile, so it's important to practice proper risk management. Set stop-loss orders, use trailing stops, and only invest what you can afford to lose. I know that stop loss orders can sometimes work against you in crypto trading - there are many times when the price would go down, just enough to hit your stop loss, only to recover the next day and you can get left out of the next rally, but it’s better too re-enter when you see the rally continue. This way you are still safer. If the pullback goes deeper, turns into a full-on correction, the price can dive by another 20-30-50% in the coming days, so it’s better safe then sorry.
Be cautious of pump and dump schemes: Altcoin season can also attract scammers who try to manipulate the market with pump and dump schemes. Be cautious of altcoins with sudden and suspicious price spikes, and do your own research before investing.
Don't underestimate the power of FOMO: Altcoin season can be driven by FOMO (fear of missing out), which can cause investors to make impulsive decisions. Be mindful of your emotions and avoid making rushed decisions. If a coin has already pumped by 80% today, maybe it’s best to avoid it. It could go another 50% by tomorrow, but it could also be the end of the pump. If you buy a token during such a peak, at least be prepared to sell it right away if it starts dumping. Don’t hold it out of fear of losses. Take the loss, move on to another one. Buying in FOMO has rekt many portfolios. I’ve done it too. A stop-loss can save you from being a bagholder in this case, so use it.
Keep an eye on trading volumes: Trading volumes can provide valuable insights into market demand for certain altcoins. Look for altcoins with high trading volumes and liquidity, as these are more likely to experience sustained growth during altcoin season. Also, you want to be able to quickly jump in and out if necessary and this is possible only when there’s enough liquidity.
Set realistic expectations: Finally, it's important to set realistic expectations for your investments during altcoin season. While some altcoins may experience massive gains, others may not perform as well. Be prepared for volatility and don’t get too greedy. If a coin starts a pullback, it can be a sign that its peak has passed, so don’t hold on for dear life. Altseasons are not very long.
The biggest altcoin season to date occurred in late 2017 and early 2018. During this period, the prices of many altcoins surged to all-time highs, with some experiencing gains of several thousand percent. This altcoin season was fuelled by a combination of factors, including increased investor interest in cryptocurrencies, the rise of initial coin offerings (ICOs), and a general sense of hype and speculation surrounding the market. However, the altcoin season eventually came to an end, and many altcoins experienced significant losses as the market corrected. We had many other such occurrences since then, during the last bull cycle in 2020-21 we also saw several altseasons, they were usually shorter, often lasting for a couple of weeks or up to a month. Remember, the best altseasons happen during Bitcoin consolidation periods and Bitcoin doesn’t move sideways for too long. Once Bitcoin starts rallying up (or down), money flows out of altcoins again. It either goes back into Bitcoin or into stablecoins (if Bitcoin is taking a dive), so play altseasons with extra caution and the mindset that it’s a short-term trade.
If you follow these tips, you will be way better off than 90% of the traders out there, most don't know how to navigate these markets.
☝These are my opinions, not financial advice, always DYOR.