If you are getting your feet wet in the crypto space, one of the most popular terms you will encounter is “altcoin season.”
Altcoin season, or Altseason, is a period in the crypto space when capital starts to flow out of Bitcoin and into all sorts of altcoins. Since Bitcoin is the pioneer cryptocurrency, any other coin is considered an altcoin.
With every market cycle, altcoins have been known to bring about lucrative gains, drawing the attention of the masses to the broader spectrum of digital assets beyond Bitcoin.
In an altcoin season, Bitcoin’s dominance over the crypto market typically recedes, allowing alternative coins to flourish and causing exponential price movements.
Here is a look at some essential facts about altcoin season.
The Rise of Altcoins
The term altcoin, or alternative coin, emerged as popular terminology in the crypto space after crypto projects such as Ethereum emerged, making it much easier for anyone to launch a cryptocurrency.
After Ethereum gained popularity in 2015 as one of the first successful altcoins, a rush towards building and launching new digital currencies ensued. This marked the beginning of a new era in cryptocurrencies, where innovative projects sought to address various shortcomings of Bitcoin and explore novel applications of blockchain technology.
Since the early days, all sorts of altcoins have emerged, representing a diversification of the crypto ecosystem while offering investors and developers myriad choices beyond the confines of Bitcoin. These alternative coins, each with unique features, use cases, and underlying technologies, have contributed to the democratization of finance and the decentralization of power from traditional financial institutions.
However, while there are currently millions of altcoins to trade, not all are designed with valuable features and use cases. Among the plethora of altcoins, numerous scams and fraudulent projects lurk aimed at deceiving unsuspecting investors. The cryptocurrency market’s decentralized and largely unregulated nature makes it fertile ground for scammers to operate.
From pump-and-dump schemes to fake ICOs (Initial Coin Offerings) and rug pulls, the landscape is rife with opportunists seeking to capitalize on Altcoin Season’s euphoria.
However, if you are still looking to capitalize on the altcoin season in 2024, here are some key indicators to watch.
Key Indicators of an Altcoin Season
There are several indicators that can help you predict the next altcoin season. While there is no single event that is known to trigger an altcoin season, several indicators can give you a hint of when an altcoin season is about to kick off.
Bitcoin Dominance
As the pioneer cryptocurrency, Bitcoin’s price and market capitalization mostly dictate the overall crypto market. When Bitcoin’s percentage of the total crypto market capitalization is high, most of the capital tends to flow into Bitcoin as its dominance in the market rises. However, after a period of dominance, Bitcoin’s position reaches overbought territory, and investors have started to look for alternative investment opportunities. At this point, Bitcoin’s dominance reduces and capital starts to flow into altcoins. While this metric is not always accurate, previous bull markets have seen Bitcoin enjoy an uptick right before altcoins join the fray.
Altcoin Season Index
There are also several tools online, such as “BlockchainCenter,” that measure the probability of an altcoin season. These tools are designed to give an index score of when an altcoin season occurs if more than 75% of the top 50 altcoins perform better than Bitcoin over a given period. Currently, the altcoin season index score shows that it’s not yet altcoin season, even though we are getting close.
Positive Market Performance
Another key indicator of an impending altcoin season is the overall performance of altcoins. When the market shifts into a bullish trend, a positive market sentiment spills over from Bitcoin to specific altcoins indicating an influx in capital. For instance, Ethereum’s breakout above an established resistance territory like the $3,500 mark, could signal a resurgence of altcoins. Also, the performance of meme coins like DOGE, SHIB and PEPE to mention a few could signal a positive market performance and a rally for other related altcoins.
Social Media Activity
If you are looking to catch the next altcoin season, it is also important to check trending social media topics. In the world of crypto, news moves fast, and investors or traders can identify potential trends and entry points in the market by staying up to date with the latest trends on social media. Be sure to check any positive news and other community forums concerning a particular altcoin to know where investors are shifting their interest.
Technical Analysis
You can also conduct some technical analysis to catch potential trends and entry points in the market. Some chart patterns, indicators and trading volume patterns can provide insight into the direction and momentum of various altcoins. A pattern such as a breakout reversal or indicators that show a markets consolidation period can help you anticipate potential price movements.
Risks and Considerations of Altcoins
Investing in altcoins comes with significant risks and considerations.
For instance, altcoins are known for their extremely volatile price movements. While an altcoin can see its price rally by over 100% in moments, the risk of a 90% pullback is also quite real, thus leading to substantial losses.
The lack of regulation also leads to easy market manipulation of most altcoins. There are tons of altcoins built on fraudulent promises, and some are even built only for pumping and dumping.
Also, compared to Bitcoin, most altcoins suffer from a lack of sufficient liquidity. As a result, you might find it hard to buy or sell your altcoin even after making significant gains.
When Should You Buy Altcoins?
Getting into the altcoin season and buying a few established altcoins can make you extra profit if you know how to time the market after careful technical analysis.
However, the overall crypto market is quite volatile, and there are no guarantees of big profits for altcoins. Any event can trigger an altcoin season, either in a bear market or a bullish one.
As you continue in your trading and investing journey, be sure to stay cautious when investing in altcoins and establish a strategy that will help you make gains while managing the risks.
