Altcoin Season: Concept & Contributing Factors

Altcoin Season

The supremacy of Bitcoin in the crypto industry has been visible since its inception. With the most significant market capitalization, Bitcoin has gained traction from global institutional investors. In fact, due to its considerable traded volume, the BTC market cap is compared to the rest of the cryptocurrencies in the market, termed Bitcoin Dominance in the crypto world. 

Earlier, the crypto space was all about BTC, but since 2011 altcoins gradually captured the market & became an integral part of it. The rising popularity of altcoins has impacted the Bitcoin market cap substantially, which sometimes leads to a fall in Bitcoin dominance. The phenomenon where numerous altcoins surpass the BTC market cap is the point where it can spark the beginning of an “Altcoin Season.”

What is an “Altcoin Season”?

The altcoin season refers to the period when the prices of multiple altcoins outperform the BTC market evaluation continuously for a few weeks or months. Altcoin season usually happens when the Bitcoin’s price stagnates after the bull run, and the investors start to reallocate their funds to alternative currencies to gain more profits, sparking a surge in the prices of the altcoin market.  

The Altcoin season happened first in mid of 2017 and at the beginning of 2018. Before 2017, BTC constituted around 80-90% of the total crypto market, and other coins remained on the side. But the trend of ICO (Initial Coin Offering) took the crypto market by storm leading to a significant rise in the price of altcoins such as ETH (Ether) and XRP (Ripple). 

Factors contributing to altcoin season:

Although there’s no way to find out the exact cause of the altcoin season, a few factors contribute to the occurrence of altcoin season. 

Transferring funds from Bitcoin to alternative currencies

Generally, during the bull market run, there’s a remarkable rise in the BTC price, which tends to get stable after a considerable amount of time. As a result, investors who seek more profits start selling their Bitcoin for altcoins, which often triggers the altcoin season. During this event, investors see an opportunity to diversify their portfolio as purchasing altcoins becomes more affordable and profitable than Bitcoin.

When the price of altcoins with a large market cap is rising

The alternative currencies like ETH and XRP have a large market capitalization other than Bitcoin. When these currencies with large market caps start gaining momentum in a bullish market, the collective altcoin market cap often surpasses the BTC market cap. As a consequence, profits sometimes flow to other altcoins, which is similar to the logic whereby investors move their funds from BTC to other potentially profitable alternative virtual currencies.

The change in trend in the blockchain space has been a vital factor in initiating an altcoin season and improving the performance of specific altcoins. In 2017, when the trend of ICO started, it triggered the altcoin season for the first time. Similarly, new trends started in the following years. For example, 2020 was the year for Defi. In 2021, NFTs gained popularity, and presently Web 3.0 is prevailing in the industry. All these trends were notable in the blockchain space, which may have corroborated the beginning of an altcoin season. 

This never-ending process of constant evolution has been stimulating the altcoin market to come up with innovative and new utility cases. Therefore, tracking the latest trends and advancements in the crypto space is essential to determine the arrival of the next altcoin season.

Despite the benefits of the altcoin season, you should consider the volatile nature of the crypto market as it is challenging to find a perfect indicator for a forthcoming altcoin season. However, analyzing historical data and trend tracking can help you spot an upcoming altcoin season. Hence it is crucial to DYOR and read more about altcoins and their types. If you wish to explore more about the crypto space, you can refer to our blogs and follow our social media channels. 

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