Altseason and what investors need to know about it

Just to set the path straight and avoid any complications, altseason simply means altcoin season. As the name suggests, it’s some kind of a season where something peculiar happens with altcoins. It’s this peculiarity that may be of great interest to an investor looking to make quick and big wins in the trade. We intend to unlock this information in the simplest format for easy understanding. Here we go…

Cryptocurrencies are increasingly gaining momentum as one of the digital modes of trade. The latest entry of altcoins into the world of cryptocurrency signals more significant disruptions in the future. What are altcoins, if one may ask? In general, altcoins can be defined as all cryptocurrencies apart from Bitcoins. Altcoin refers to all cryptocurrencies that sprung up following the success and failures of Bitcoin, hence the name, which stands for “alternative to Bitcoin.”

Altcoins largely came to plug in some of the inefficiencies that bitcoin failed to address as well as respond to new market trends and emerging issues about virtual currencies.  Most altcoins are developed and released by different developers with different visions or utilization for their tokens or crypto businesses.   

Bitcoin is currently recognized as the world’s largest cryptocurrency by market share and is extensively traded worldwide. Bitcoin commands a significant share of cryptocurrency market trading volume, which led to the formation of a widely recognized metric (Bitcoin Dominance), which compares BTC to non-BTC crypto. 

Like other cryptocurrency trades, there are certain times when altcoins firmly outdo Bitcoin (BTC), referred to as altcoin season or, in short “altseason”. Altcoin season is critical for crypto traders seeking to take advantage of market opportunities. During altseason, altcoins normally outdo BTC, prompting BTC to lose its dominance within the crypto market. Due to this aspect, seasonal cryptocurrency traders and investors with diversified portfolios consider altseason to adjust their portfolios consequently. 

During an altseason, prices of non-BTC shoot up as investors and traders transfer their money outside BTC into other cryptocurrencies. The moment prices start rising, FOMO (fear of missing out) investment begins, which causes a snowball effect that shoots altcoin prices even higher for a short period. Most investors can make a significant amount of profits for the year during Altseason if they are in a position to sell their altcoins before the end of the Altseason as money begins to move back into Bitcoin.

What investors need to know about Altseason

Because of the volatile nature of cryptocurrencies, no perfect indicator can signal an impending Altseason. However, historical data may be significant in predicting possible Altseason. Three leading indicators can likely foretell Altseason.

  • When Bitcoin is enjoying high prices or expected to rise

In the past, Bitcoin’s high prices have often rendered altcoins gaining well in the cryptocurrency trade. The phenomenon is widely associated with investors buying altcoins since they are more affordable than BTC, making them profitable and more attractive.

  • Whenever the prices of huge market capitalization altcoins begin to rise

Whenever altcoins such as BNB or ETH enjoy an upsurge in price surpassing BTC, profits may flow to other altcoins simultaneously. This is the same scenario when investors start transferring their funds from BTC to other possibly profitable altcoin investments. Apart from BTC, other cryptocurrencies bear large market caps altogether.

  • Whenever a new blockchain trend emerges

The might of blockchain trends has been significant in determining the performance of certain altcoins. For instance, during the peak season of DeFi (altcoin) in 2020, the altcoin began witnessing growth. 

The metaverse trend is another drift that attracted gamers’ interest and other fans outside the crypto world. Since altcoins are fundamental to accessing the metaverse, it is no surprise that their popularity grew when the metaverse shook the world. As blockchain patterns and milestones continue emerging, the hysteria surrounding altcoins embroiled in these patterns will probably follow suit.

Principles for timing altseason  

First, Bitcoin dominance will always increase when people increasingly buy or hold Bitcoin

Second, Bitcoin dominance will always decrease when people increasingly release or sell Bitcoin.

Looking at the two principles, its possible to take away the fact that that stocking Altcoins whenever Bitcoin Dominance is surging upwards is not a good idea. This is because investors and traders are willing to hold or stock Bitcoins instead of Altcoins. In the end, people tend to buy more Bitcoins while selling Altcoins. It means that Bitcoin’s price increases while those of various Altcoins drop. 

Withholding Altcoins during such times would be a losing battle and a substantial opportunity cost. Not only does a trader lose money with Altcoins whenever Bitcoin Dominance surges upwards, but one also loses the opportunity to earn profit from Bitcoin.

Lastly, the sharper the decrease in Bitcoin Dominance, the stronger the Altseason