The largest crypto in the world is Bitcoin, both in market value and in the price of each unit, and also in terms of what attracts attention in discussions in the crypto universe. In any case, this is not the only project.
In reality, there are thousands more, 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 ups than corrections, there are also seasons for these other projects. That's exactly what we are going to discuss in this article. And as an added benefit, we will also share some of the best strategies to profit this season.
What would an Altcoin Season be? And how could it be possible to identify when something happens?
The 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 looking to ride this wave. This phenomenon occurs due to a significant increase in the demand and value of these altcoins.
This market cycle usually begins when Bitcoin has already reached new price records or is close to reaching them.
The logic is more or less as follows: with Bitcoin on the rise, many investors start looking for alternatives to expand their portfolios, leading to increased interest and value in altcoins in a parallel effect that ultimately contributes to the advancement of altcoins.
With this context presented, we can check three important signals for the Altcoin Season verification thermometer:
Altcoin Performance: you know that an altcoin season is occurring when more than 75% of the top 50 altcoins outperform Bitcoin over the last 90 days;
Trading Volume: Another strong point that indicates the occurrence of a season for these alternative projects is the significant increase in the trading volume of altcoins;
Market Capitalization Divergence: The difference in valuation between Bitcoin and altcoins becomes more evident, highlighting that investors are migrating some of their funds to altcoins.
This last point is a bit more open and less trivial to follow than the first two. But ultimately, if you can identify the occurrence of all three points at the same time, the chances that you are facing an altcoin season are very high.
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 arise to monitor certain phenomena.
When we talk about altcoin season, we have a very positive example of it: to help predict the arrival of a new season like this, the Altcoin Season Index emerged, which gradually became a valuable tool for investors.
This index measures the performance of the top 50 cryptocurrencies (excluding Bitcoin) compared to Bitcoin and shows which is yielding the highest returns over a 90-day period.
The Altcoin Season index is displayed on a scale from 0 to 100:
Values above 75 indicate that an Altcoin season is taking place, suggesting that altcoins are dominating the market in terms of performance;
Values between 25 and 75 point to a more balanced market, with no clear leadership between Bitcoin and altcoins;
Values below 25 indicate that the market is in Bitcoin season, suggesting that Bitcoin is outperforming altcoins.
If you follow this index, you won't need to do calculations "by hand" (or using any sophisticated artificial intelligence tool) to understand what's happening and then know whether or not it's an altcoin season.
Is an Altcoin season approaching?
At the time this article is written, as the first half of November 2024 comes to a close, the Altcoin Season Index indicates that the market is reasonably balanced, meaning it is in the 25-75 range in terms of the analyzed score.
In any case, it’s possible that an upcoming season is one where we look at a direct aspect of Bitcoin itself, which has been on a record streak. With prices skyrocketing, as we have already told you 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 now, but it is possible that we will 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, 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 it 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 variations in the Altcoin Season index and monitor signals that the market is heading towards a Bitcoin or Altcoin season;
Diversify your assets: focus on altcoins that have a solid design, an experienced team, and real utility. Diversifying your portfolio with altcoins from different sectors (like DeFi, gaming, or utility tokens) can help mitigate risk for the portfolio as a whole;
Study the history of the altcoins you want to invest in: research the price history and behavior of altcoins in previous cycles to identify which would have 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 could indicate an upward trend ahead of a new Altcoin Season;
Set profit limits and loss limits: just like in any other investment that involves changing your mind, you should have defined beforehand what your profit goals would be and what your potential loss limits are. Doing this helps protect your capital and prevents you from making impulsive decisions during the boom cycle, which is often marked by high volatility.
This last point is extremely important when we talk about altcoins, because the field of attention that exists on Bitcoin is immensely greater than what we see in relation to the vast majority of altcoins. And if you are not aware of the kind of volatility you might face, you could make very negative decisions with your own investment portfolio.
Why does the rise in Bitcoin's price encourage the altcoin market?
When Bitcoin reaches new price levels, the cryptocurrency market as a whole tends to gain visibility, and investors begin to look for other assets. When many investors realize that Bitcoin has become more "expensive" and less accessible, this ultimately promotes a shift towards exploring altcoins that may still offer great growth potential at a relatively lower cost.
Moreover, another thing that happens when the price of Bitcoin rises significantly is a psychological effect of increasing the value of the cryptocurrency market as a whole, which encourages interest in altcoins. The idea is that if Bitcoin were on an appreciation trajectory, other digital currencies could also experience significant growth.
You are now prepared for the next Altcoin season!
The 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 not only learned how to identify the beginning of one of these seasons, but you also learned about 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 seize the opportunities that arise.
In any case, don’t get carried away by emotions: remember that the cryptocurrency market is volatile and that each investment should be made with caution and research. An Altcoin Season can be an excellent opportunity, but strategy and analysis are essential to achieving success in this dynamic environment.
Are you already looking forward to the next Altcoin season? Let us know!
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Photo by Coinpedia.
