06.12.2021

What is Altcoin Season and how can you make money on this cycle of the crypto market?

The share of bitcoin in the crypto market continues to decline, while the altcoin market is booming. But does this mean that the so-called altcoin season has come – a period when many cryptocurrencies are ahead of bitcoin in terms of price and growth rate.

We will tell you why altcoins win back positions and how to secure your funds from losses at this time.

In April, Bitcoin’s dominance dropped to 52.8% for the first time in the past two years. This happened against the backdrop of an increase in the capitalization of the cryptocurrency market above $ 2.2 trillion, caused largely by a sharp rise in the price of altcoins. However, now the share of the main digital coin in the industry is still high.

For example, during the 2017 rally, Bitcoin’s dominance fell to 34%.

What is the Altcoin Season Index?

Dominance Index (dominance) is the share of bitcoin capitalization in the cryptocurrency market. To calculate it, it is enough to divide the capitalization of the main cryptocurrency by the total market capitalization and multiply by 100. However, there is an easier way – the share of bitcoin in the industry can be viewed on data aggregator sites such as CoinMarketCap and CoinGecko.

You can also use the Altcoin Season Index, which tracks the quotes of the top 50 cryptocurrencies by capitalization. If 75% of them bring more profitability than Bitcoin for three months in a row, then the altcoin season index is going up. And now it is at 92 out of 100 points.

The low share of bitcoin in the market suggests that investors are willing to take risks, as they transfer part of the funds from the market benchmark, bitcoin, to more risky altcoins.

This often happens in a growing market when investors are trying to find more profitable assets than the first cryptocurrency. At the same time, during a decline, the opposite process occurs, since altcoins almost always lose much more on drawdowns in the cryptocurrency market than BTC.

Altcoins that went off in 2021

In recent months, the largest projects and market leaders have shown hundreds and thousands of percent of growth. So, for example, the Binance Coin, the capitalization of which ranks third after bitcoin and ether, has risen in price almost 17 times this year, and on April 12, it even reached a record $ 638.

Immediately behind BNB is the XRP cryptocurrency, which in December last year, amid Ripple’s litigation with the US Securities and Exchange Commission (SEC), fell to a local minimum of $ 0.17. Since then, the coin’s quotes have risen almost 10 times – up to $ 1.69. At the same time, the cryptocurrency remains far from its all-time high of $ 3.7, set in January 2018.

Another striking example is the utility token of the Indian trading platform WazirX. It showed an increase of 1,400% only since the beginning of March, and its capitalization exceeded $ 1 billion. With such a seemingly colossal market valuation for cryptocurrencies, the asset is only 92nd in this indicator.

At the same time, BitTorrent’s BTT token showed an increase of 2,000% in a few weeks, and on April 5, it updated its all-time high at $ 0.013. Altcoins THETA and Filecoin also showed impressive dynamics, each of which has grown in price by 570% since the beginning of the year.

Why did altcoins start to actively rise in price?

The situation in which altcoins outpace bitcoin in terms of profitability on the crypto market is called the altcoin season. In 2017, while the first cryptocurrency showed a 2,000% return over the year, assets like XRP were up 56,500%. According to the SecretsOfCrypto analyst’s description of market cycles, funds begin to flow into altcoins when bitcoin stops active growth and passes the stage of consolidation.

This is exactly what happened in the last month. For a long time, bitcoin could not overcome the $ 60,000 mark and update the March maximum of $ 61,800, trading in a narrow price range, many altcoins showed a powerful rise in quotations and won back part of the market share.

However, now, when the rate of the first cryptocurrency sharply exceeded $ 60,000 (and on April 14, it even got close to $ 65,000, updating its historical maximum), most of the largest altcoins in terms of capitalization show less than Bitcoin, growth per day or not much exceed it.

The exception is XRP, which has gained almost 90% in price over the past week. Previously, this altcoin remained undervalued amid litigation by the SEC and Ripple. However, now that more and more positive factors appear in the case, which speak of the possible victory of the blockchain startup from San Francisco, the price of the XRP coin is actively growing.

How to make money safely during altcoin season?

The market has moved to the stage when any altcoin, regardless of fundamental factors, can demonstrate an explosive growth in quotes. This is due to the fact that investors are looking for new opportunities to earn money and buying up assets with low capitalization. As a result, this has a positive impact on the value of such assets.

SecretsOfCrypto analyst advised to have clear expectations and time horizons when investing in certain assets of the altcoin market. In the long term, they may not have special prospects, but attentive investors will be able to capitalize on their growth in a short time.

in order to reduce the risks of working with cryptocurrencies during the altcoin season, it is necessary to accept that this area remains unregulated by the Wild West. Many people will want to make money on the new wave of hype not in the most honest way. Moreover, it is important to understand that most altcoins will disappear over time.

Yes, they can experience periods of growth, but the subsequent decline can bring serious losses if risk management is not followed:

  • Investing in little-known altcoins is possible only with the money that is not scary to lose.
  • You should not consider the purchase of such assets as the main way of earning money.
  • Cryptocurrencies are extremely volatile. And the cost of altcoins with low capitalization can drop by tens of percent per day.

Also, before you buy an altcoin of this or that little-known project, you should study its website, documentation, information about team members and look for reviews from other users. A positive sign – if there is a team behind the project that does not hide behind pseudonyms and is ready to communicate. Equally important is the community that supports the chosen cryptocurrency.

Altcoins that have just appeared and are starting to develop are often not available for trading on the largest crypto exchanges such as Binance, Coinbase or Kraken. It is necessary to find out on which crypto exchanges the assets are represented, and whether these trading platforms are trustworthy.

The final and main rule is that it is better to miss a profit than to incur losses. Do not give in to FOMO (fear of lost profits) and try to make money on absolutely all altcoins that are starting to show growth.

And most importantly, you shouldn’t think that this is the last chance to make money. Markets are cyclical, you just need to be able to wait patiently.

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