How to Read the Altcoin Season Index

Bittime - The start of this year has witnessed a positive trend in the cryptocurrency market, with Bitcoin And altcoin provide profitable opportunities for investors. 

Even though Bitcoin is hitting new peaks, many new traders are focusing more on altcoins in search of profits.

 Therefore, understanding what an “altcoin season index” is is becoming increasingly important.

What Is Altcoin Season?

Altcoin season, or altseason, usually occurs when the price of an alternative cryptocurrency spikes significantly and outperforms Bitcoin. 

Increased market activity, trading volume, and bullish sentiment towards altcoins marks the start of altcoin season. 

It is important to note that altcoin seasons are not fixed events and can vary in duration and intensity.

While altcoin season can offer profitable profit opportunities for investors, it also comes with higher risks and market volatility. 

To know the best altcoins to buy, you need to understand the various dynamics of altcoin seasons, their triggers, and the general indicators that exist.

Altcoin Season vs. Bitcoin Season

Altcoin season and Bitcoin season are two different phases in the cryptocurrency market cycle.

Bitcoin season refers to a period when the price of Bitcoin experiences significant growth and dominates altcoins. 

For example, Bitcoin experienced a price spike after several launches ETF Bitcoin, reaching $99,574.60 post US election. 

In this period, Bitcoin almost doubled in value in less than two months, outperforming alternative cryptocurrencies.

In contrast, altcoin season occurs when altcoins surpass Bitcoin in terms of price appreciation and market capitalization. 

While Bitcoin season is often associated with a more stable market environment, altcoin season is characterized by higher volatility and trading activity.

History of Altcoin Previous Season

Previous altcoin seasons have seen tremendous price spikes across various altcoins, with some experiencing exponential growth in a short period of time. 

Notable examples of the altcoin season include the bull run in 2017-2018 and 2020-2021.

Altcoin Season 2017-2018

This altcoin season was triggered by a decline in Bitcoin dominance, from 86.3% at the end of 2017 to 38.69% at the beginning of 2018. 

During this period, Bitcoin prices fell from record highs above $20,000 to below $6,000 a few months later. 

The surge in altcoins comes at a time when the ICO market is booming, with many blockchain projects launching ICOs to raise funds.

Altcoin Season 2020-2021

The 2020-2021 altcoin season occurred during the COVID-19 pandemic, as retail traders looked for investment opportunities outside of Bitcoin. 

This resulted in the birth of the modern meme coin, with Dogecoin and Shiba Inu recording historic growth. 

During this period, Bitcoin dominance fell from 70% to 38%, while the market value held by altcoins increased from 30% to 62%.

Early Signs of Altcoin Season

After seeing examples of previous cycles, you may be asking, "When will the next altcoin season start?" 

Identifying the start of an altcoin season requires a solid understanding of market cycles and trends. 

Here are some key signs that could indicate the start of a new altcoin season.

1. Increased Altcoin Dominance

One of the main indicators signaling the start of altcoin season is the increasing dominance of altcoins in the overall cryptocurrency market. 

Altcoin dominance refers to the collective market capitalization of all cryptocurrencies, except Bitcoin, expressed as a percentage of the total cryptocurrency market capitalization.

2. Increased Trade Volume

Another significant sign of the start of altcoin season is a spike in trading volume across altcoins. 

Increased trading volume indicates higher crypto market activity and investor interest in altcoins, leading to greater liquidity and price volatility.

How to Read Altcoin Season Index

Some cryptocurrency analytics platforms offer special indices designed to track and measure the performance of altcoins relative to Bitcoin. 

The altcoin season index gathers data from the top 50 altcoins and analyzes their price movements to determine if an altcoin season is underway. 

When the altcoin season index is at 75% or more, this indicates that the altcoin season has begun.

Read too When will Altcoin Season Start in 2024 and 2025? These are the signs!

Trading Risks During Altcoin Season

Although altcoin season offers profitable opportunities, there are some risks that traders need to be aware of:

1. Buying at Too High a Price

FOMO (Fear of Missing Out) can encourage investors to buy altcoins at exorbitant prices during busy market periods. 

However, buying at inflationary prices increases the risk of loss if the price then experiences a correction, which usually ranges from 30-40%. 

It is important to stick to an investment strategy that is based on in-depth research and analysis.

2. Extreme Volatility

Altcoins are known for their high volatility, where prices often experience rapid and unpredictable fluctuations. 

While this can result in large profits, the risk of significant losses also increases.

Therefore, it is important to implement a good risk management strategy.

Read too Altcoin Season Starts When Bitcoin Prices Drop, Here's Why!

3. Pump and Dump Schema

Some projects may engage in pump and dump schemes, where the price of an altcoin is artificially inflated through coordinated buying activity before being quickly sold, causing huge losses to unsuspecting investors. 

It is important to be careful and avoid projects that show suspicious price movements or overly aggressive marketing.

By understanding these risks, traders can be better prepared to deal with challenges that may arise during altcoin season and make wiser investment decisions.

Conclusion

Investors are gearing up for the next altcoin season. 

Even though the altcoin season index is currently showing at 22%, there may still be some time before the next altcoin craze begins. 

Even though it offers profit opportunities, investors must be careful, conduct thorough research, and be prepared to face the risks associated with volatile market conditions.

FAQ

What Is The History Of Altcoin Season?

The history of altcoin seasons includes periods when altcoin prices experienced significant spikes and outperformed Bitcoin. 

Notable examples of altcoin seasons occurred in 2017-2018 and 2020-2021, where many altcoins experienced exponential growth. 

In 2017, a decline in Bitcoin dominance from 86% to 38% triggered a surge in altcoin prices, while in 2020-2021, the COVID-19 pandemic and interest in meme coins such as Dogecoin led to huge growth in the altcoin market.

What Is an Altcoin Season Cycle?

The altcoin season cycle refers to a recurring pattern in the cryptocurrency market where altcoins experience a period of significant growth after Bitcoin reaches a peak in price. 

Typically, this cycle begins after Bitcoin completes its price rise, and investors begin to turn their attention to altcoins in search of profit opportunities. 

This cycle is characterized by increasing altcoin dominance and high trading volume.

Why Is Altcoin Season Important?

Altcoin season is important because it provides profitable investment opportunities for traders and investors. 

During these periods, many altcoins can experience significant price increases, often far outpacing Bitcoin's growth. 

Understanding altcoin season helps investors to identify the right time uto invest and exploit potential profits in the cryptocurrency market.

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Reference

Eliman Dambell, What Is Altcoin Season Index and When Is It Coming?, Accessed December 4, 2024

Coin Edition, Bitcoin and the Altcoin Season Index Explained, Accessed December 4, 2024

Author: IN