Understanding Altcoin Season in Just 3 Minutes – The ₿log

Initially, Bitcoin dominance was close to 100%. But the emergence of new projects on the blockchain and the growing popularity of altcoins have caused bitcoin dominance to give way to “altcoin seasons.” They can last several weeks or even several months. But what is meant by this expression? Can we foresee this?

What are we to understand by this expression?

This anglicism, specific to the crypto ecosystem, which can also be found under the term “altcoin season”, refers to the period when altcoins outperform the benchmark cryptocurrency, bitcoin. As a reminder, the term “altcoin” can be defined as all cryptocurrencies on the market, except Bitcoin (BTC).

This seasonal phenomenon usually reflects a paradigm shift in the cryptocurrency market. This allows investors to look for market opportunities, volatility, returns… while diversifying their crypto portfolio.

It should be understood that the advent of the altcoin season de facto marks the decline in the dominance of bitcoin in the market. However, we can see that at the end of the alternative season, the profits accumulated by investors will be replaced by bitcoins. What marks a new cycle of Bitcoin dominance.

How important is the Bitcoin dominance ratio?

This ratio will compare Bitcoin’s market capitalization to all other cryptocurrencies (altcoins) on the market. For example, if the entire crypto market is worth $2 trillion and Bitcoin has a capitalization of $1.2 trillion, its market dominance would be 60% versus 40% for altcoins.

If there is no specific indicator that determines the start of the altcoin season, the Blockchain Center website provides an appropriate tool (altcoin season index) to gauge market sentiment and determine if the market is in bitcoin or altcoin season. If 75% of the top 50 cryptocurrencies (excluding stablecoins like Tether, DAI, etc.) outperform Bitcoin, then we will enter altcoin season. At the time of writing, we see that Bitcoin is still in a dominance situation.

July 22, 2022 barometer – source

In addition, the chart below shows the change in this ratio during a rolling year. Several points can be noted:

  • The last alt season lasted only a few days in mid-January 2022.
  • The altcoin season lasted for several weeks from April to July 2022.
  • Bitcoin dominance remains very strong in July 2022.

Read also Get to grips with Web 3.0 in just 3 minutes

Altcoin seasonal chart

July 22, 2022 barometer – source

How to determine the season of altcoins?

While it is obviously impossible to foresee or predict the onset of “sector rotation” in cryptocurrencies, there are generally recurring elements that can put investors on their guard. Thus, when the prices of large market cap altcoins (Cardano, Ripple, Solana, Binance coin, etc.) start to rise, it will trigger a fundamental move that activates all altcoins more or less quickly.

Altcoin season could also come after a major Bitcoin bull run. The latter will eventually stabilize and investors looking for better investment opportunities may take the opportunity to sell their bitcoins against other altcoin alternatives.

It may also be a trending phenomenon. The emergence of NFTs, the development of web 3.0, DeFi, the metaverse, play to earn… these are all favorable trends for projects based on altcoins. With the constant development of the crypto ecosystem and blockchain, some altcoins may attract more attention than Bitcoin.

Conclusion: Altcoin vs Bitcoin Season

Even though Bitcoin still retains a large market share of cryptocurrencies, “alternative seasons” will continue to repeat themselves. These phases of altcoin dominance should even increase over time. Indeed, many new cryptocurrencies will appear, and some projects will still gain popularity and capitalization.

Thus, investors will have regular opportunities to diversify their portfolios. But you still have to position yourself on quality issues. This requires prior good knowledge of the crypto environment. It will also require an in-depth study of the basics of projects related to certain altcoins.

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