Every cryptocurrency trader is looking forward to the carnival, because this is the period when many small-cap altcoins explode and the return on investment may be much higher than that of mainstream currencies. But its arrival time usually depends on several core factors, rather than a fixed time point. The following are the key judgment bases and influencing factors:
1. BTC Dominance Declines
Bitcoin (BTC) usually attracts the most funds in the early stages of a bull market, causing its market capitalization share (Dominance) to rise. When the BTC hegemony index begins to decline, it usually means that investors begin to shift funds to Ethereum (ETH) and other altcoins after taking profits.
Signals:
• Bitcoin's market cap percentage continues to decline from a high level (such as 50% or more) to around 40% or below.
• Altcoins start to rise in succession, but BTC remains stable or slightly rises, indicating that market funds are more willing to gamble on high-risk assets.
2. Overall Market Sentiment
The altcoin season often requires a high acceptance of risk in the market, which is extreme optimism (FOMO sentiment at its peak). For example, when people believe that 'the big rally cannot be missed,' even if many altcoin projects have no value, they start to surge significantly, which is usually a precursor to the start of the altcoin season.
Phenomena:
• Social media and trading groups frequently feature content like 'XXX coin has doubled again' and 'hurry and get on board.'
• Many low-quality projects also start to attract large funds and speculators.
3. Bitcoin's upward momentum slows or moves sideways
Historical data shows that when Bitcoin's upward momentum slows, funds will shift to altcoins in search of higher returns. This phenomenon was very evident during the bull markets of 2017 and 2021.
Time Characteristics:
• BTC gradually enters a consolidation phase after hitting a new high.
• During BTC's sideways movement, certain high-quality altcoins (such as ETH, BNB, SOL) will lead the way, driving overall enthusiasm for altcoins.
4. Indicators of Altcoin Sector Explosion
Typically, the altcoin season will be truly ignited after the following sectors gain momentum:
• Layer 2 sector (e.g., Arbitrum, Optimism related coins).
• GameFi and NFT sector (e.g., Axie, SAND, MANA, etc.).
• Privacy coins or innovative concept sector (e.g., ZEC, ZEN).
• DEX or liquidity protocol-related coins (e.g., UNI, DYDX, 1INCH).
After one sector becomes strong, speculative funds will flow to other thematic sectors, fully igniting the altcoin market.
5. Current Market Environment and Forecast
• At this stage (by the end of 2024), Bitcoin is still oscillating at a high price level, and the overall market sentiment has not yet entered extreme optimism.
• ETH's recent performance has been stronger than BTC's, indicating that some funds are already flowing into altcoins, which may be a precursor to the altcoin season.
• If mainstream altcoins (such as SOL, MATIC) rise first, funds are expected to spread to small-cap coins within a few months.
Altcoin Season Strategy Recommendations
1. Stage your ambush: When mainstream altcoins are taking off, look for coins that have not yet started but have real potential.
2. Quick in and out: Altcoins are highly volatile, so learn to set profit-taking and stop-loss levels, and avoid getting too attached.
3. Diversify your layout: Do not invest heavily in a single project; spread your investments to reduce risk.
4. Pay attention to hot topics: Follow market hot topics, and timely respond when a sector explodes.
Biggest Risks of Altcoin Season
Be wary of the 'dumping risk' at the end of the altcoin season. When most coins have skyrocketed and low-quality projects start to follow suit, it often indicates that the peak of the bull market is approaching. At that time, if the market suddenly drops, the decline of altcoins is usually several times that of mainstream coins.
Therefore, to seize the altcoin season, one must learn to 'ambush in fear and exit in frenzy.'