Initially, Bitcoin dominance was close to 100%. But the appearance of new projects on the blockchain and the growing popularity of altcoins have caused this Bitcoin dominance to fall in favor of “altcoin seasons”. They can last a few weeks or even several months. But what is meant by this expression? Can we anticipate it?
What should we understand behind this expression?
This Anglicism specific to the crypto ecosystem, which can also be found under the term “altseason” refers to a period when altcoins outperform the benchmark cryptocurrency, Bitcoin. As a reminder, the term “altcoin” can be defined as all cryptocurrencies on the market other than Bitcoin (BTC).
This seasonal phenomenon usually reflects a paradigm shift in the cryptocurrency market. He allows investors to seek market opportunities, volatility, gain… while diversifying their crypto portfolio.
It should be understood that the appearance of an altcoin season de facto marks a decline in Bitcoin’s dominance in the market. What can be observed, however, is thatat the end of an altseason, the profits accumulated by investors will be placed back into bitcoin. What mark a new cycle of bitcoin domination.
The importance of the Bitcoin dominance ratio?
This ratio goes compare the market capitalization of bitcoin, compared to all other cryptocurrencies (altcoins) on the market. For example, if the entire crypto market is worth $2 trillion and Bitcoin has a capitalization worth $1.2 trillion, its market dominance would be 60% versus 40% for altcoins.
If there is no particular indicator determining the emergence of an altcoin season, the Blockchain Center website provides a relevant tool (Altcoin season index) to gauge market sentiment and determine if the market is in Bitcoin season or alt-season. If 75% of the Top50 crypto (excluding stablecoins like Tether, DAI, etc.) outperform Bitcoin then we are entering an Altcoin Season. At the time of writing, we can see that Bitcoin is still in a situation of dominance.
Barometer dated July 22, 2022 – source blockchaincenter.net
In addition, the chart below shows the change in this ratio over a rolling year. Several points can be noted:
- The last altseason only lasted a few days in mid-January 2022.
- A multi-week altcoin season occurred between April and July 2022.
- Bitcoin dominance remains very strong in July 2022.
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Barometer dated July 22, 2022 – source blockchaincenter.net
How can you spot an altcoin season?
While it is obviously impossible to anticipate or predict the start of “sector rotation” on cryptos, there are generally recurring elements that can alert investors. Thus, thehen the prices of high market capitalization altcoins (Cardano, Ripple, Solana, Binance coin, etc.) begin to rise, this will generate a fundamental movement that will energize, more or less quickly, all altcoins.
An altcoin season can also occur after a major bullish move in Bitcoin. The latter will eventually stabilize and investors looking for more profitable investment opportunities could take the opportunity to sell their bitcoin against other alternatives from altcoins.
There may also be a trend phenomenon. The appearance of NFTs, the development of web 3.0, DeFi, the metaverse, play-to-earn… are all favorable trends for projects based on altcoins. Thanks to the constant evolution of the crypto ecosystem and the blockchain, certain altcoins can thus attract more attention than Bitcoin.
Conclusion: Altcoin season VS Bitcoin
Even though bitcoin still retains a large share of the cryptocurrency market, alt-seasons will continue to repeat themselves. These phases of outperformance of altcoins should even increase over time. Indeed, many new cryptos will emerge and some projects will still gain popularity and capitalization..
Investors will therefore have regular opportunities to diversify their portfolios. But it will still be necessary to position oneself on qualitative issues. This requires a good knowledge of the crypto environment beforehand. An in-depth study of the fundamentals of projects linked to certain altcoins will also be necessary.
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