After Donald Trump's victory in the US presidential election on November 5, a kind of bubble began to inflate in altcoins.
Many altcoins are suffering significant losses in the cryptocurrency markets today after weeks of gains.
What is happening?
The mini-altseason: has the altcoin bubble burst yet?
In reality, it would not be correct to say that the altcoin bubble has burst, however, several mini-bubbles have indeed burst.
It all starts with the Bitcoin correction that occurred between November 23rd and 26th.
Trump's victory was declared on November 6, and at that moment, the price of Bitcoin began a rise that in just over two weeks took it, for the first time, above $99,000.
On November 22, however, the price of Bitcoin failed to break the psychological threshold of $100,000, and the next day began a correction that lasted almost four days, bringing it back below $92,000.
During this correction, however, FOMO was still present in the cryptocurrency markets, and so it simply shifted to altcoins.
Indeed, CoinMarketCap’s Altcoin Season Index began to rally, climbing back above the 50 mark on November 25 for the first time in a long time.
This index ranges from zero to 100. Below 25 points reveals a Bitcoin season, while above 75 points an altcoin season (more simply called altseason).
After passing through 50 points on November 25, in less than a week it also shot above 75 points, revealing that an altseason was underway.
However, in just three days, it reached the peak of that period, and on December 5, as Bitcoin for the first time in its history rose above $100,000, the altcoin season index began to decline.
So it wasn't a true altseason, but a miniature altseason, or mini-altseason.
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December 5th marked the end of the growth period for altcoins, which basically lasted about two weeks.
On Sunday, the CMC altcoin season index was still above 80, but yesterday it plummeted to just above 60.
What happened?
The point is that during the mini-altseason mentioned above, many speculative mini-bubbles inflated across several altcoins, though not all of them.
These were not truly large speculative bubbles, but rather short mini-bubbles and, above all, of relatively small size, because they were bubbles.
In particular, however, it was the speed with which they formed that raised some suspicions.
On the one hand, many of the altcoin rallies in late November were clearly parabolic, on the other hand, a Bitcoin awakening was expected on December 5th.
And so, simply with the BTC awakening, all the mini-bubbles that had formed, or were forming, slowed down their growth, or even stopped.
The explosion of mini-bubbles
The fact is that bubbles in financial markets always burst, sooner or later. You never know exactly when they will burst, and especially from what price levels they will start to fall, but you know that if they inflate, then they will deflate.
Observing the rapid parabolic rises in the prices of many altcoins, it was clear that these were mini-bubbles, and while no one could have known when they would burst, Bitcoin’s expected awakening on December 5th should have rung an alarm bell.
The explosion, however, began yesterday, Monday, December 9, and today it simply continues.
Although the picture is quite clear at this point, it is necessary to add some very important details to fully understand these dynamics.
Short vs. long term
Mini-bulls are temporary phenomena that frequently form in financial markets.
In other words, they are relatively common, if not very common, dynamics that should therefore not come as any surprise.
In particular, mini-bubbles have such a short duration that they almost never manage to interfere with the medium/long-term price trend. They have a clear and significant impact only in the short term, and often, once they burst, they leave things more or less as they were before they began to deflate.
For those who are dedicated to trading, in fact, they are an excellent opportunity, in theory, to try to buy at a low price and sell at a higher price in the shortest possible time.
Instead, for those holding them, they are merely a nuisance if things go well, and if things go badly, they can be opportunities to lose money if the assets are purchased at prices that are too high.
What to expect from the altcoin mini-bubble?
Furthermore, there is another very important detail to consider.
When a mini-bubble bursts, everything goes back to the way it was before, and therefore nothing prevents other bubbles from inflating in the future.
Indeed, if Bitcoin's rally were to eventually resume, a similar dynamic to what has happened in recent weeks could absolutely repeat itself, even multiple times.
The discussion only changes if the bubbles are macro, that is, of much longer duration and extension.
In light of this, it is obvious that mini-bubbles can be great opportunities for traders, but for holders, they tend not to be positive at all. After all, Bitcoin is primarily the cryptocurrency that seems most suitable for holding, while as far as altcoins are concerned, they are often best used only for trading, both in the short and medium term.
