What Is the Altcoin Season Index and How to Know It?

Bittime - What is altcoin season index and how to know it? Altcoin Season Index is a tool designed to help crypto investors and traders know if the market is in the phase of "Altcoin Season" or "Bitcoin Season." 

Also read What is Crypto RSI Heatmap? A Guide to Understanding Crypto Market Conditions

How Altcoins Happen?

Altcoin Season occurs when 75% of the top 100 altcoins in the market outperform Bitcoin in the last 90 days. The index is updated daily by CoinMarketCap (CMC) to provide real-time insights into the trend of altcoin dominance in the crypto market. 

If you want to understand when it’s time to focus on altcoins, check out how to use the Altcoin Season Index to maximize your investment strategy.

Also read: Frequent Losses When Trading Crypto? Here Are 7 Causes!

What Is Altcoin Season Index and How Does It Work?

The Altcoin Season Index uses data from the top 100 altcoins, excluding stablecoins like Tether and DAI, and wrapped tokens like WBTC, stETH, and cLINK. Every day, CMC evaluates the performance of these altcoins against Bitcoin. 

If more than 75% of altcoins outperform Bitcoin over the past 90 days, the market is considered to have entered the Altcoin Season phase. 

Conversely, if less than 25% of altcoins outperform Bitcoin, then it is Bitcoin Season. The index provides a score from 1 to 100, making it easy to track market developments on a daily basis.

Also read Doji Candlestick: Definition, Types, and How to Read It

Altcoin Season Characteristics: How to Identify It?

1. Increasing Altcoin Dominance

During Altcoin Season, altcoins as a whole start to dominate the market. For example, during Altcoin Season in May 2021, the combined market cap of the top 100 altcoins reached 130% of Bitcoin's market cap. 

This indicates that investors were more interested in altcoins than Bitcoin during that time period.

2. Significant Price Increase

Altcoin Season is usually marked by a sharp increase in altcoin prices, often outstripping Bitcoin's growth. 

For example, during the Altcoin Season period from February to May 2021, large-cap altcoins achieved gains of up to 174% compared to Bitcoin's growth of only around 2%. 

This trend shows that there is a lot of new interest and narrative emerging, covering more than one or two investment themes.

3. FOMO (Fear of Missing Out) 

During Altcoin Season, market sentiment is generally bullish, with optimism that altcoins can provide big returns. 

This FOMO is reflected in high 24-hour trading volumes across all large-cap altcoins, which increases buying pressure and overall price momentum.

How to Know Altcoin Season Using the CMC Altcoin Season Index

You can visit the CMC Altcoin Season Index page to monitor market developments. With data updated daily, the index makes it easy for users to see if an altcoin dominance trend is underway. 

When the index reaches a high score approaching 100, then it is likely that the market is in Altcoin Season, and vice versa if it is at a low value.

Benefits of Knowing When Is Altcoin Season

Knowing when Altcoin Season occurs can be an important strategy for investors looking to maximize profits from altcoin investments. 

Typically, Altcoin Season follows a similar pattern, starting with a Bitcoin price increase that triggers bullish sentiment across the market. 

After that, the price of Ethereum tends to rise, and activity on the Ethereum network increases. 

These developments brought many users and funds into the altcoin ecosystem, creating new narratives and rotating capital from Bitcoin to altcoins.

When Is It Time to Switch to Altcoins?

By monitoring the Altcoin Season Index from CoinMarketCap, you can see an indicator of whether the market is favoring altcoins or Bitcoin. 

When the market is in Altcoin Season, investors may consider allocating more funds to altcoins that have high growth potential. 

This can also help you capture opportunities in various sectors such as DeFi, GameFi, and NFT which usually thrive during Altcoin Season.

Reference: coinmarketcap.com/charts/altcoin-season-index

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