The biggest crypto in the world is Bitcoin, both in terms of market value and the price of each unit, and also in terms of what draws attention in discussions in the crypto universe. In any case, this is not the only project.
In reality, there are thousands of others and the group of all these projects is called “altcoins”, which are alternative digital currencies to Bitcoin.
Just as there are periods when Bitcoin is expected to have more highs than corrections, there are also seasons for these other projects. That is exactly what we will talk about in this article. And, as a bonus, we will also tell you some of the best strategies to profit from this period.
What is an Altcoin Season? And how would it be possible to identify when one happens?
Altcoin Season is a period in the cryptocurrency market when altcoins (alternative coins to Bitcoin) begin to outperform Bitcoin itself, providing unique investment opportunities for those who want to ride this wave. This phenomenon occurs due to a significant increase in the demand and value of these altcoins.
This market cycle usually starts when Bitcoin has already reached new price records or is close to them.
The logic is more or less as follows: with Bitcoin on the rise, many investors begin to look for alternatives to expand their portfolios, leading to an increase in interest and value of altcoins in a parallel effect that ends up contributing to the advancement of the crypto market as a whole.
With this context presented, we can verify three important signs for the verification thermometer of an altcoin season:
Altcoin performance: You know an altcoin season is happening when more than 75% of the top 50 altcoins outperform Bitcoin in the last 90 days;
Trading volume: Another strong point that points to the occurrence of a season of these alternative projects is the significant increase in the volume of altcoin trading;
Divergence in market capitalization: The difference in valuation between Bitcoin and altcoins becomes more evident, highlighting that investors are migrating part of their funds to altcoins.
This last point is a bit more open and less trivial to track than the first two. But ultimately, if you can spot all three points happening at the same time, the chances are very high that you are looking at an altcoin season.
Altcoin Season Index: How does it work?
One of the most interesting things about the power of community in the crypto universe is how direct means of monitoring certain phenomena emerge.
When we talk about altcoin season, we have a very positive example of this: to help predict the arrival of a new season, the Altcoin Season Index was created, which gradually became a valuable tool for investors.
This index measures the performance of the top 50 cryptocurrencies (excluding Bitcoin) against Bitcoin and shows which one is yielding the most returns over a 90-day period.
The Altcoin Season Index is displayed on a scale of 0 to 100:
Values above 75 indicate that an Altcoin Season is underway, suggesting that altcoins are dominating the market in terms of performance;
Values between 25 and 75 point to a more balanced market, without a clear leadership between Bitcoin and altcoins;
Values below 25 indicate that the market is in Bitcoin Season, which suggests that Bitcoin is outperforming altcoins.
By following this index, you won't need to do calculations “by hand” (or using some sophisticated AI tool) to understand what's going on and then know whether or not an altcoin season is happening.
Is there an Altcoin Season coming?
At the current time of writing - as we approach the end of the first half of November 2024 - the Altcoin Season Index indicates that the market is reasonably balanced - that is, it is in the 25-75 range in terms of the score analyzed.
In any case, it is possible that a season is approaching when we look at a direct aspect of Bitcoin itself, which has been the record-breaking streak. With the price rising, as we have already said here, more investors are interested in the market as a whole and this could serve as an incentive for a positive wave in altcoins.
So, just to emphasize: we are not in an Altcoin Season right now, but we may see one approaching in the coming periods due to the strong rise of Bitcoin. The last Altcoin Season we had was, according to the Index, in January 2024. And, in this same year, we had two Bitcoin Seasons between mid-June and early September.
Strategies for Investing During an Altcoin Season
Now that you know what an Altcoin Season is and how you can objectively identify that one is happening, it's time to learn some strategies that can help you make good investment decisions in altcoins.
See five of these strategies below:
Monitor the Altcoin Season Index: Pay attention to the variations in the Altcoin Season Index and follow the signs that the market is heading towards a Bitcoin or Altcoin Season;
Diversify Your Assets: Focus on altcoins that feature a solid project, an experienced team, and real utility. Diversifying your portfolio with altcoins from different sectors (such as DeFi, gaming, or utility tokens) can help minimize the overall portfolio’s losses;
Study the history of the altcoins you want to invest in: Research the price history and behavior of altcoins in previous cycles to identify those with the greatest potential for appreciation. Some examples of altcoins with a good performance history include Ethereum, Cardano, and Solana;
Pay attention to trading volume: Trading volume can be an indicator of investor interest, through what we can call liquidity. Keep an eye on altcoins that are registering high trading volumes, as this can signal an upward trend at the beginning of a new Altcoin Season;
Set profit and stop-loss limits: As with any other investment involving heart rate fluctuations, you need to define your profit targets and potential loss limits before you even start; doing so helps protect your capital and prevents you from making impulsive decisions during the bull cycle, which is usually marked by high volatility.
This last point is very important when we talk about altcoins, because the attention that exists on Bitcoin is immensely greater than that which we see in relation to the vast majority of altcoins. And, if you are not aware of the type of volatility that you may face, you can make very negative decisions with your own investment portfolio.
Why does the rise in Bitcoin price encourage the altcoin market?
When Bitcoin hits new price highs, the cryptocurrency market as a whole tends to gain visibility, and investors start looking for other assets. When many investors realize that Bitcoin has become more "expensive" and less accessible, this ends up promoting a movement towards exploring altcoins that can still offer great growth potential at a relatively lower cost.
Furthermore, another thing that happens when Bitcoin’s price rises significantly is a psychological effect of appreciation in the cryptocurrency market as a whole, encouraging interest in altcoins. The idea is that if Bitcoin has had a trajectory of appreciation, other digital currencies may also experience significant growth.
Now you are prepared for the next Altcoin Season!
Altcoin Season is a highly anticipated cycle in the cryptocurrency market, with great potential for investors looking to capitalize on the growth of altcoins. Here you will learn not only how to identify the beginning of one of these seasons, but also solid strategies that can help you maximize profits and mitigate risks. By monitoring the Altcoin Season Index, diversifying assets, and analyzing trading volume, you will be better prepared to take advantage of opportunities that arise.
In any case, don’t get carried away by emotion: remember that the cryptocurrency market is volatile and that every investment should be made with caution and research. An Altcoin Season can be an excellent opportunity, but strategy and analysis are essential to achieve success in this dynamic scenario.
Are you already looking forward to the next Altcoin Season? Let us know!
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Photo by wombatzaa, available on Freepik