What is Altcoin Season? Signs of Altcoin Season

Hello Dear Bulbers, today we are gonna look at something practical and one that is currently trending in the cryptocurrency market, as we discuss about Altcoin and altcoin season, its risks and benefits and so on.

ALTCOIN

All other coins, excluding Bitcoin, are collectively known by a single term: altcoin. The Altcoin Season frequently occurs after Bitcoin sees a strong upswing. So what exactly is Altcoin Season? Let us immediately investigate!

What is Altcoin Season?

Altcoin Season is the term used to describe the time when many altcoins see significant price increases at the same time. After Bitcoin saw a dramatic increase in value from $30k to $70k in a matter of months, traders expect a strong altcoin "bull run" during this period. Notably, the growth rate of altcoins during Altcoin Season often exceeds that of Bitcoin, with the potential for gains of x5, x10, or even x50. Investing in altcoins became appealing during this period because almost every altcoin could profit investors.
The phrase "Altcoin Season" or "Altseason" refers to when altcoins are seeing rapid growth in the cryptocurrency market. This phrase first appeared in the cryptocurrency space between 2016 and 2017, when traders started to see notable returns on their altcoin investments.
When the price of Bitcoin drops significantly, investors usually move to the altcoin market. Regardless of Bitcoin's volatility, altcoins typically see a series of price explosions throughout the Altcoin Season.

Altcoin is short for Alternative Cryptocurrency, meaning cryptocurrencies other than Bitcoin. In fact, any coin created after Bitcoin, whether intended to replace Bitcoin or not, is referred to as an Altcoin, including platform tokens like Ethereum or Polkadot.

The connection between altcoins and bitcoin

In essence, altcoins are frequently traded alongside Bitcoin on cryptocurrency exchanges. Bitcoin may be exchanged for most altcoins. Because of this, the price correlation between altcoins and Bitcoin is very distinct. A lot of altcoins experience declines in tandem with Bitcoin. But as Bitcoin gains traction and draws in money from the whole market, some other cryptocurrencies might also rise, while the majority of altcoins might fall.
As many other coins, including ETH, BNB, and EOS, as well as stablecoins, like USDT and USDC, have arisen and become popular, Bitcoin is no longer the only cryptocurrency used for altcoin trading.

The Indicators of Altcoin Season

The Bitcoin Dominance Index is Decreasing

The dominance index of Bitcoin, or Bitcoin Dominance, measures the market capitalization of Bitcoin relative to the total market capitalization of cryptocurrencies. For instance, if the market capitalization of Bitcoin is $1 trillion and the total market capitalization of altcoins is $500 billion, the Bitcoin Dominance index would be (1 trillion USD / 1.5 trillion USD) x 100 = 66.66%. When this index begins to decline, it signifies a shift in capital from Bitcoin to altcoin purchases, or a rise in the number of new altcoin purchases. The Altcoin Season in 2017 saw a drop in Bitcoin Dominance to 37.84%.

The Cryptocurrency Market Cap is Growing Overall

It may be a "fake signal" for Altcoin Season if Bitcoin Dominance declines but overall market capitalization stays flat. On the other hand, it might not qualify as an altcoin season if the Market Cap is rising but the Dominance of Bitcoin is staying constant.
For these two things to be seen as indicators of an altcoin season, they must coexist. This is only a relative dividing technique, though, and the market is not required to adhere to it.

Cash Flow Slowly Converts from Bitcoin to Altcoins

In the history of the cryptocurrency market, most Altcoin Seasons have appeared after strong price increases in Bitcoin. Particularly, after the 4th Halving event, Bitcoin underwent a significant price surge and is currently in a sideways phase.
This is a golden time for altcoins when a large amount of capital is poured into the cryptocurrency market but Bitcoin no longer yields significant profits. At this point, investors tend to use Bitcoin or stablecoins to invest in altcoins.

Benefits and Dangers of the Altcoin Season

Risks
·       No guarantee of profit without Altcoin Season: There is a common misperception that gains will undoubtedly be made during Altcoin Season. The bitcoin market is vulnerable to "whale" manipulation. According to statistics, the majority of the gains made by investors with tens of millions of dollars in capital during the time when Bitcoin rose from $3,000 to $12,000 went to these individuals; small retail investors, on the other hand, lost money as they bought at the top and sold at the bottom.
·       Overflow of “junk” Altcoins: Low-cap cryptocurrencies have a chance to gain popularity during Altcoin Season, but not all altcoins are useful. Up to 90% of altcoins, in the opinion of many experts, are "junk" and not worthwhile investments. Pump-and-dump operations frequently cause these Altcoins' price increases, and participating in such ventures entails extremely significant risks. In order to determine whether an investment is worthwhile, you need conduct a thorough investigation into the project's quality, the investors, the development team, and other pertinent details.
·       Altcoin Season may end earlier than expected: The duration of Altcoin Season is uncertain. It is possible for investors to withdraw their funds too late once Altcoin Season concludes. Consequently, once you have realized the anticipated profit, know when to give up. Recall that making a profit is always appropriate.
Benefits
·       High likelihood of winning: There's a good probability that the market's fervor will cause the Altcoins you invest in to rise sharply, unless it's a very bad project.
·       Very large growth potential: The price of large-cap coins like Bitcoin rises gradually. Small-cap altcoins, on the other hand, can readily grow by x5, x10, or even more. Following an Altcoin Season, several investors have seen a hundreds-fold boost in their holdings.
When Altcoin Season Arrives, What Should I Do?

·       Identify the Stage of Capital Flow: It is advisable to invest when fresh money enters altcoins that haven't seen much growth yet in order to maximize returns. This enables you to foresee trends and profit from market expansion as money starts to flow in.
·       Identify Valuable Altcoins and Capital Flows: The likelihood of a winning investment can be greatly increased by simply determining which form of coin the market is capitalizing on. Accurate coin analysis is not always necessary. DeFi, trading tokens, ICO trends, etc. are a few examples. Projects operating on DOT or Binance Smart Chain are the newest trends. Keeping an eye on these trends will assist you in locating possible investment possibilities.
·       Make an Investment Plan: Give precise instructions on how much you would invest, your anticipated profit margin, and your entry and exit locations. The primary distinction between amateur and professional investors is the establishment of a well-defined plan and the disciplined execution of it. You may optimize returns and retain discipline by creating a thorough investment strategy.
·       Determine Whether Altcoin Season is Real: This is critical because short-term market price trends can lead us to believe that Altcoin Season is coming. When the market exhibits brief signals of expansion, hold off on making an investment. Examine closely to see if Altcoin Season is indeed here to avoid making financial mistakes by investing at the wrong moment.

What's the duration of the altcoin season?

While the length of an Altcoin Season isn't fixed, it usually lasts two to three months. The first part of 2021, from March to May, is a recent example.
The Bitcoin Dominance index (BTC.D) fell from 60% to as low as roughly 39% throughout this time. Every altcoin saw a boom, frequently seeing a double or triple increase in value from the start of the year. Before March, the value of several prospective altcoins even increased tenfold.

Trading Techniques for the Altcoin Season

Short-Term Strategy
When investors hold altcoins for a few months or less and then sell them fast to generate a profit, this is known as short-term trading. Altcoins frequently see significant swings in value, sometimes doubling overnight. As a result, this strategy's benefit is the greater potential for investors to make larger gains.
The difficulty with short-term tactics, though, is that prices move quickly. You must be vigilant and precisely assess market movements in the near future in order to trade profitably. The fact that short-term trading necessitates an investment commensurate with the anticipated reward is another drawback. However, not every trader has the tools and speed of mind to allocate money for trading with confidence.
Long-Term Strategy
Altcoins are kept for at least a year following purchase as part of a long-term strategy. Long-term trading, as opposed to short-term techniques, enables the observation of price changes over an extended period. Furthermore, investors can buy Altcoins gradually over time in tiny sums rather than having to invest a large sum of money all at once.
A long-term strategy's drawback is that you can lose out on unforeseen profit chances when short-term market fluctuations occur. But if you keep onto your altcoins for a while, you may also take advantage of the market's long-term development and lessen the pressure to make snap judgments.

Conclusion

Altcoin Season denotes the time frame over which traders believe that altcoin investments will be more profitable than bitcoin ones. Experts anticipate that as Bitcoin's price rises, altcoins will become the most advantageous option for small investors looking to optimize their returns. But it's important to keep in mind that investing too much or without sufficient market knowledge could turn into gambling. I hope your Altcoin season is prosperous and advise you to exercise caution!
Thank you all for reading and enlightening yourself about the altcoin season as we approach the peak of the bull market for questions or enquiries please leave a comment below.
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