As exciting as Bitcoin (BTC) entering price discovery is, crypto enthusiasts know that the most exciting things are yet to follow. How soon is the next altcoin season, when the real gains come in? The altcoin season index might help you know. Learn everything worth knowing about it in our guide!
Key Takeaways
- Altcoin season refers to crypto market conditions when other cryptocurrencies perform better than Bitcoin, potentially leading to higher returns in riskier coins;
- A useful indicator to detect an upcoming altcoin season is the altcoin season index. It summarizes how many altcoins outperform BTC and can be presented as a graph breaking down their performance or chart following the historical trends;
- Additional indicators that can signal an emerging altcoin season are Bitcoin dominance and total altcoin market capitalization. It is important to note that no indicator is reliable on its own and they best work in a complex analysis.
Brief Intro to Altcoin Season
What even is this altcoin season and why is there so much buzz around it? If you venture into alternative cryptocurrencies, that is, cryptocurrencies other than Bitcoin (BTC), you might want to know when it comes.
The so-called altcoin season refers to conditions in the cryptocurrency market when these crypto assets, commonly referred to as altcoins, perform better than BTC. It is not something that occurs regularly or at reliably predictable times but rather a descriptor for such conditions.
How long does the altcoin season last? Past altcoin seasons lasted for weeks and even months. January 2024 saw two weeks of increased trading volumes in alts, and from March to June 2021, the altcoin season lasted almost three months.
What is the Altcoin Season Index?
Traders have used various metrics to track market shifts and even devised unique ones for the crypto market specifically. These indicators provide insight into the current state of the alts market, as well as its changes.
A popular metric that is fine-tuned and easy to grasp is the altcoin season index. Its massive advantage over the alternatives is that it tracks only altcoins with value dependent on market factors. In other words, stablecoins and wrapped tokens are not counted, presenting a clearer picture.
How Does It Work?
Indices are normally calculated using a formula or a set of criteria, and once you know what the altcoin season index measures, it is intuitively clear. It tracks the performance of top altcoins over the longer term, usually 90 days.
The index is 1-100, with the number showing the percentage of tracked altcoins outperforming Bitcoin. If only 25% or less of tracked altcoins outperform Bitcoin, it is considered Bitcoin season. Respectively, once 75% or more altcoins outperform Bitcoin, the altcoin season is on.
Resources that track the altcoin season index, such as CoinMarketCap, offer helpful charts and graphs to help you gain more information from the data. The index chart demonstrates the changes in the index over time. The index also usually comes with a bar chart that breaks down how many altcoins outperformed Bitcoin and by how much. Therefore, you can also track the altcoin price trends and compare the performance of each asset.
Navigate the Market with the Altcoin Season Index
The topical index is a valuable tool to analyze altcoin markets at the given moment, as well as observing the historical trends. It can also provide actionable insights even before the next altcoin season sets in.
How can the altcoin season index inform trading and investment strategies? Just as an example, Bitcoin season is a surefire sign that for one reason or another altcoin prices are underperforming. Some investors would focus on Bitcoin and more stable assets at times like these while others might start accumulating. Positive developments can serve as a trigger to the trend change and give an opportunity to switch to alts before a new altcoin season.
Historical analysis of the cryptocurrency market shows that it moves in cycles, usually following a bull run in Bitcoin. However, altcoin seasons and market cycles are not always correlated. For example, a 2020 DeFi summer happened earlier than the 2021 Bitcoin bull run and saw the altcoin season index rise from 41 to 89, while BTC rose by 30%.
Gauging the Crypto Market Sentiment
Usually, when the altcoin season index rises, it is a sign of a shift in investor interest. As the market heats up, for example, under the influence of rising rates, market sentiment starts to favor assets with higher risks, such as altcoins.
In that sense, you can also notice the altcoin season coming by the investor sentiment shifting toward greed on the fear and greed scale. It is important to understand that the two indices are correlated but not directly linked. A greedy market sentiment may as well occur in the Bitcoin season.
Other Altcoin Season Indicators
Altcoin season index works best in conjunction with other indicators. We have already mentioned that there are many tools in addition to it, so let us briefly cover them next.
Altcoin Market Capitalization
Total altcoin market capitalization (ALTCAP), also known as altcoin dominance refers to the total market capitalization of the cryptocurrency market excluding Bitcoin. Analyzing this metric can also help understand the wider market trends and Bitcoin’s market dominance shifts.
Another helpful indicator is called TOTAL3, which is the total cryptocurrency market cap excluding Bitcoin and Ethereum. It does not have the benefit of clarity that the altcoin season index provides due to counting stablecoins and wrapped tokens. However, it gives valuable insights into the state of the price fluctuations in smaller crypto assets.
Bitcoin Dominance
Just like altcoin dominance reflects the altcoin market cap, so can Bitcoin’s market dominance (BTCD) by the reversal of the logic. Declining market share in Bitcoin signals different things depending on what is happening to the price of Bitcoin or total market capitalization.
During an altcoin season, the BTCD tends to go down while the collective market capitalization rises with increasingly allocating capital in alts.
Should You Wait for the Altcoin Season?
Is the altcoin season an end-all-be-all pinnacle of the crypto market? Of course, not: in fact, these market conditions come with extra factors to watch out for. The market volatility is higher during these times, and the market euphoria can mess with your investment decisions.
Keeping an eye on the altcoin season index and other key indicators can be useful if you plan to capitalize on altcoin rallies. In the end of the day, an altcoin season only provides extra opportunities to score substantial gains on price volatility in riskier assets.
Even if you do not intend to chase gains in altcoins, knowing what is going on in the overall cryptocurrency market can prove beneficial. At the very least, it can inform the degree of risk management for potential volatility and black swan events, occasionally arising in an overheated market.
Cryptocurrency Market Sentiment and the US Elections
The results of the 2024 U.S. Presidential Elections proved bullish for the crypto market sentiment, as the reinstated Donald J. Trump administration is believed to bring positive regulatory developments. As soon as the results were officially announced, the market received a boost that helped Bitcoin (BTC) enter price discovery.
As we have mentioned, macroeconomic factors and events like this can act as catalysts for growing investor interest and rising trading volumes. The altcoin dominance, though, does not seem to follow the increased trading volume yet. So is an altcoin season coming?
According to the altcoin season cycle, the upcoming altcoin season that we can reliably expect will follow the Bitcoin rally in 2025. However, the conditions in the cryptocurrency markets hint at a potential altcoin season as well. It might be too late getting into rallying altcoins but if you already own some, keep an eye on your portfolio.
Conclusion
Very aptly named, altcoin season is ultimately the time with its own opportunities and risks. It is also a great argument in favor of portfolio diversification, and for those needs, ChangeHero is always here for you.
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Frequently Asked Questions
What is the altcoin season index?
The indicator called altcoin season index tracks the performance of top altcoins over extended time frames and compares them with Bitcoin. The more altcoins outperform BTC, the higher the index on the 1-100 scale.
Which is the best altcoin?
Identifying the best altcoin to invest in depends on a multitude of factors and considerations. We strongly encourage you to perform thorough research or consult a professional before you invest in alts.
What is altcoin season Bitcoin dominance?
Usually, the lower the Bitcoin dominance, the higher the altcoin season index rises. In the previous altcoin seasons, BTC dominance ranged from 39.97% to 49.85%.
How to detect alt season?
Recognizing the start of an altcoin season requires a solid grasp of market cycles and trends. The altcoin season index is one of useful key indicators that can help but it works best in conjunction with others.
What causes alt season?
Altcoin seasons are typically a result of exponential growth in bullish investor sentiment. As they become more confident, they venture out to assets with higher risk, leading to a decline in Bitcoin’s dominance in favor of alts.
Disclaimer
This article is not financial or investment advice. When dealing with cryptocurrencies, remember that they are extremely volatile and thus, a high-risk investment. Always make sure to stay informed and be aware of those risks. Consider investing in cryptocurrencies only after careful consideration and analysis of your own research and at your own risk.
