With the rise of institutional adoption of cryptocurrencies, especially with the introduction of Bitcoin ETFs, the flow of capital into the market tends to start with large investments in BTC. Large companies, such as institutional funds, buy BTC from holders who already hold the currency. These holders, fearing that they will miss out on the future appreciation of Bitcoin, decide to sell their holdings to lock in profits, but instead of liquidating in cash, they opt to reinvest in altcoins.
This movement is directly reflected in Bitcoin dominance, which tends to increase as BTC attracts more capital. BTC dominance is the percentage of the total cryptocurrency market value represented by Bitcoin, and a rise in this indicator shows that capital is concentrated mainly in BTC, with altcoins taking a back seat. When BTC reaches high levels of appreciation and dominance increases, the phenomenon known as "#altcoinseason" often emerges. During this period, after Bitcoin has already led the market, investors begin to seek higher returns in altcoins, which, due to their greater volatility, offer a faster appreciation potential.
Investors who sold BTC and bought altcoins in anticipation of a higher valuation may benefit from this altcoin season. As interest in these alternative coins increases, capital begins to flow into altcoins, temporarily reducing Bitcoin’s dominance. However, after a bullish cycle in altcoins, capital tends to return to Bitcoin, especially as the market reaches a more mature level, attracting institutional investors again. This cycle of capital movement between BTC and altcoins is one of the most common dynamics in the cryptocurrency market and reflects the ups and downs of Bitcoin’s dominance, with periods of Altcoin Season followed by renewed momentum in BTC.
However, it is not enough to know how to embark on this cycle, buying BTC or altcoins at the right time. The most important thing is also knowing when to disembark. Knowing when to sell and take profits is essential to avoid sudden drops in the market, which can occur unpredictably, especially when Bitcoin dominance begins to rise and altcoins undergo corrections. Therefore, it is essential to monitor both BTC dominance and market signals, ensuring that the investor knows when to exit altcoins and return to BTC to protect their gains and take advantage of the best opportunities.