- What is Altcoin Season?
- 5 Signals to Spot When Altcoin Season Begins
- What are Altcoins and How Many Currently Exist?
- What is the Difference Between Altcoins and Memecoins?
- Where Can You Trade Altcoins?
- What are the Best Altcoins to Buy in 2024?
- Is it Profitable to Trade Altcoins?
Altcoin season is a popular trope in the crypto world that references a phase in a market boom cycle when alternative cryptocurrencies (altcoins) begin to outperform Bitcoin (BTC) and more recently, Ethereum (ETH).
Historical trends have shown that crypto boom cycles often begin with capital first flowing into the BTC and ETH. When the market bounce gains momentum and evolves into a full-blown bull rally, investors begin to reallocate capital toward altcoins and memecoins.
Crypto investors often switch focus to altcoins (every other cryptocurrency outside of BTC and ETH) during a market rally for two main reasons: to diversify their portfolio, and to amplify their gains.
For instance, since the 2023 crypto market rally began in mid-October, Bitcoin and Ethereum have had a disproportionate increase in capital inflows, compared to the rest of the altcoin market.
The chart above shows that between October 10 and December 10 2023, the global crypto market cap skyrocketed by nearly 50% from $1.05 trillion to $1.64 trillion. Bitcoin and Ethereum recorded 62% and 56% increases respectively.
Expressed in numerical terms, the entire crypto market valuation has grown by $590 billon in the last 60 days between October 10 and December 9 2023.
But notably, BTC and ETH have dominated the charts pulling $333 billion and $99 billion respectively, during that period.
This chart depicts that the two big guns, Bitcoin and Ethereum account for $432 billion, or 73% of the valuation growth recorded in the crypto market since October 10. Meanwhile, the rest of the over 2,000 listed cryptocurrencies have record a joint total valuation growth of $158 billion during that period.
But as the crypto market rally stretches into its third consecutive month strategic investors have started looking out for signals to determine when the next altcoin season starts. i.e When altcoins will start to outperform BTC and ETH.
5 Signals to Spot When Altcoin Season Begins
Interestingly, some of the critical on-chain data trends observed this week, have offered some early clues. But before delving into those details, its crucial to first identify the universal signals that serve as precursors for a typical altcoin season kickoff.
1. Market Dominance Shift: Bitcoin’s market dominance, which represents its share of the total cryptocurrency market capitalization, may decrease during altcoin seasons. This indicates that altcoins are collectively gaining a larger market share.
The Bitcoin Dominance (BTC.D) indicator is a vital metric that investors can use to track the shift in market momentum towards altcoins.
When BTC.D begins to trend downward (as seen in the blue trend line above), while the total crypto market cap increases, it can be considered a vital signal for an impending altcoin season.
2. Social Hype: There is usually heightened interest and hype across various social media channels around specific altcoins. News, social media discussions, and speculative trading contribute to the overall market euphoria.
To spot when the market sentiment has titled toward altcoins, investors can monitor shifts in social hype with on-chain metrics such as Social Dominance and Social Volume.
Santiment deploys big data and artificial intelligence (AI) analytics tools to analyse the social trends of the top 50 most mentioned crypto assets online.
Essentially, Social Dominance tracks the total traffic, and keywords mentioned across relevant crypto media channels such as, Twitter (X), Telegram, Reddit, Facebook chat rooms and even Google search trends.
Hence, when Bitcoin and Ethereum’s percentage share of mentions and traffic begin to decline, it is a tell-tale sign that investors are now paying more attention to altcoins.
As observed in the chart above, at peak, Bitcoin and Ethereum Social Dominance attracted 27% and 8.1%, respectively, of the total crypto media traffic on December 7. But since then, both have been trending downward.
This infers that media spotlight is now gradually shifting toward the rest of the altcoin market. If it persists, it could evolve into another major driver for the next altcoin season.
3. Price Surge: Altcoins, which are any cryptocurrencies other than Bitcoin, experience substantial price increases. This surge can be driven by various factors, including technological developments, partnerships, community support, and market trends.
4. Increased Trading Volumes: Trading volumes for altcoins tend to rise during altcoin seasons as more market participants buy and sell these assets. Higher trading volumes are often associated with increased market activity and volatility.
5. Diversification: Traders and investors often seek to diversify their portfolios by allocating funds to a variety of altcoins, seeking opportunities for higher returns compared to holding only Bitcoin.
It’s important to note that altcoin seasons are market phenomena and are not guaranteed to occur regularly. The cryptocurrency market is known for its volatility, and price movements can be influenced by a wide range of factors, including macroeconomic trends, regulatory developments, technological advancements, and investor sentiment.
As with any investment, investors should exercise caution and conduct thorough research before making decisions during altcoin seasons.
“Altcoins” is a collective term that refers to every other actively-traded cryptocurrency outside of Bitcoin and Ethereum. The exact number of altcoins is continually changing due to new projects entering the market and others fading away. However, the current data as of December 2023, there are 11,383 cryptocurrencies listed on Coingecko, tracked across 940 crypto exchanges.
These altcoins offer a diverse range of features, use cases, and technologies beyond those found in the Bitcoin and Ethereum ecosystems.
The primary distinction between altcoins and memecoins lies in their underlying purpose and community-driven nature. Altcoins, short for alternative coins, encompass a broad spectrum of cryptocurrencies that serve various functions, from facilitating smart contracts to offering enhanced privacy features.
Memecoins, on the other hand, are a subset of altcoins that often gain popularity based on internet memes and community engagement rather than inherent technological advancements. As of December 2023, Dogecoin (DOGE), Shiba Inu (SHIB) and PEPE are the largest and most popular memecoins.
Altcoins are traded on various cryptocurrency exchanges, both centralized and decentralized. Some popular centralized exchanges include Binance, Coinbase, and Kraken, while decentralized exchanges like Uniswap and Sushiswap offer a more anonymized and non-custodial trading experience.
Traders can choose between these platforms based on various factors such as liquidity, security, anonymity as well as the range of available altcoins and fiats currencies.
Heading into 2024, Ripple (XRP), Solana (SOL), Chainlink (LINK) are some of the best performing altcoins over the last 365 days.
However, predicting the best altcoins in the future involves extensive research and analysis. The cryptocurrency market is dynamic, and the performance of altcoins can be influenced by technological developments, partnerships, and market trends. However,
The profitability of trading altcoins depends on various factors, including market conditions, investor knowledge, and risk tolerance. Altcoin markets are known for their volatility, presenting opportunities for both profit and risk.
Traders should conduct thorough research, implement risk management strategies, and stay updated on market trends to enhance their chances of profitable trading.
It is recommended to stay informed about the latest news, understand the industry narratives, and fundamentals of each altcoin, and also consider consulting with financial experts before making investment decisions..