Alt Season And Tips To Spot It On Time

Crypto markets are governed by a concept of seasonality. One would think this has something to do with winter bear runs or flash crashes that are often referred to as crypto storms. However, this is not the case.

Crypto seasonality is the belief that Bitcoin will go up and down in circles, drastically affecting the overall crypto market. When Bitcoin starts to rally, dominating the price charts and outperforming altcoins for an extended period, it is called “Bitcoin season”. And when altcoins outperform Bitcoin for a significant period of time, it is termed an ‘altcoin season’ or ‘alt season’.

What does the start of the alternate season signal?

According to the Blockchain Center, when 75 percent of all altcoins outperform Bitcoin over a 90-day period, it is classified as altcoin season. On the other hand, if Bitcoin outperforms more than 25 percent of all altcoins, the market is witnessing a Bitcoin season.

Another metric that can be used to measure the seasonality of cryptocurrencies is ‘Bitcoin Dominance’. This metric is measured by dividing the market cap of Bitcoin by the market cap of all altcoins combined. When Bitcoin outperforms altcoins, the market cap and Bitcoin Dominance increase. Likewise, when altcoins outperform Bitcoin, altcoin market capitalization rises and Bitcoin dominance falls.

Altcoin season is marked by a period of Bitcoin dominance fading along with a rising altcoin market capitalization. Bitcoin’s current dominance stands at 43 percent and moves along with the altcoins, which means that it is currently not a season during the general cryptocurrency crash.

Previously observed altcoin seasons on the charts:

1. From the end of February 2017 to the middle of June 2017: Bitcoin’s dominance plummeted from 86.30% to 38.69% (the most severe drop seen so far)

2. From early January 2021 to mid-May 2021: Bitcoin dominance plummeted from 71.89% to 40.08%

Previously observed Bitcoin seasons on the charts:

1. Between mid-June 2017 and early November 2017: Bitcoin dominance increased from 38.69% to 61.85%

2. Between early May 2018 and mid-September 2018: Bitcoin dominance increased from 35.86% to 55.58%

3. Currently ongoing as of mid-April 2022: Bitcoin dominance has increased from 40.76% to 43% (touched 47% at one point)

Why does an Altcoin season happen?

There are two main reasons why fluctuating market capitalizations lead to cryptocurrency season swings:

1. Transfer of assets: When the price of Bitcoin has risen significantly, investors looking to make a profit could sell their BTC on the open market and enter positions in undervalued altcoins. This causes the market capitalization of Bitcoin to fall and that of altcoins to rise. This invariably triggers the start of an altcoin season.

2. Developments in the altcoin space: Many new blockchains are developed with enhanced capabilities and functionality that have useful applications. When investors believe that the use cases will propel blockchain development to new highs, they immediately start redirecting their funds towards these altcoin blockchains, for example, the popularity of NFTs in 2021 triggered a long season of altcoins.

How can investors spot an Altcoin season?

According to Cointelegraph, there are a couple of indicators that could signal the start of an altcoin season:

1. ETH/BTC price movement: The Ethereum blockchain was the first alternative blockchain to emerge after Bitcoin, making Ether (ETH) the first alternative currency. Therefore, most altcoins are known to follow the faster reacting price action of ETH.

Cointelegraph recently published an interesting chart tweeted by Twitter user alias Plan_DeFi, which compared the current price movement of ETH/BTC to that of 2016-17. The pattern formation hinted that the next altcoin season could start in July 2022 and last until the end of the calendar year.

Here is the graph:

“It looks very similar, right? Accumulation>Break>Rising Channel>Break. The market is bigger now, it just takes longer,” Plan_DeFi wrote in the tweet.

2. Altcoin Season Indicator: Blockchain Center data shows that only 29% of all altcoins currently outperform Bitcoin. Until this number reaches 75%, the market is firmly locked into a Bitcoin season.

altcoin 2 quantet

While this indicator is not enough on its own, it is certainly useful for spotting developments that could signal the start of a trend.

3. Altcoin history: Another Twitter user operating under the pseudonym El_Crypto_Prof shared a chart mapping altcoin market capitalization over time. Clearly indicate when turning points appear.

This is what the chart looks like:

altcoin 3 quantet

“When it comes to altcoins, I can see the following scenario. There are too many similarities with the previous cycle. RSI also looks amazing. The next wave will leave many behind,” the user wrote in the tweet.

RSI or Relative Strength Index indicates whether the underlying asset is overbought or oversold in the market. It ranges from 0 to 100 and a value above 70 means overbought (bullish sentiment), and below 30 means oversold (bearish sentiment).

The above 3 indicators together paint a vivid picture of the ongoing crypto season and provide a reasonable amount of data to make an informed decision about what may come next.