Understanding market cycles—bear and bull phases—is crucial for informed investing in cryptocurrency. Altcoins tend to trail Bitcoins during bear markets, yet they have the ability to surpass Bitcoin in subsequent bull markets.
With the BTC spot ETF and halving events on the horizon, this analysis is more pertinent than ever. If ever there was a time to invest in altcoins, now is it.
Better yet, bank on a cryptocurrency trading bot with human intervention, like R100K, that will diversify your investments to ensure you get the most return.
Today, I am analyzing why I think the altcoin season is upon us. I’m looking at how altcoins not only follow Bitcoin’s market movements historically, but often exceed them in terms of growth.
So, let’s try and create a deeper understanding of altcoin seasons, highlighting altcoins potential for significant gains and the timing of their market movements relative to Bitcoin.
Altcoin Season Index
Altcoin season index is a metric devised to keep track of when it’s altcoin season. It’s calculated based on the top-50 altcoins with the most market cap, and their performance relative to BTC.
If 75% of these altcoins are performing better than BTC, it’s alt season.
At the time of writing, we’re on the cusp of the altcoin season index hitting the 75% mark.
49% of the top-50 altcoins are performing better than BTC.
This is a sign that altcoins are on the cusp of breaking out. And I strongly feel, if you want to make big gains, right now is the time to invest.
Altcoins in Bull Markets (Altcoin Seasons in Past Years)
Source: Coin metrics
While Bitcoin’s bull runs have been impressive, the altcoin seasons often paint an even more dramatic picture of growth and potential.
Below, we’re highlighting peak prices and growth rates of different altcoins during the subsequent bull markets.
It’s important to note that these examples are just a snapshot; numerous other altcoins have also seen remarkable surges, often outperforming Bitcoin in terms of percentage growth.
- Bitcoin (BTC): From a low of ~$3,200 in 2018 to a high of ~$64,000 in 2021, marking an increase of over 1900%.
- Ethereum (ETH): Surged from below $100 in 2018 to $4,362 in 2021, representing a growth of over 4262%.
- Binance Coin (BNB): Increased from about $6 in 2018 to around $35 in 2020, a growth of more than 483%.
- Cardano (ADA): Rose from under $0.04 in 2018 to $2.46 in 2021, indicating a growth of over 6150%.
- Solana (SOL): Jumped from $0.47 in 2020 to $70 in 2021, showing a significant surge of over 14830%.
- Ripple (XRP): Climbed from $0.11 in 2020 to $1.96 in 2021, a growth of approximately 1682%.
Bitcoin vs. Altcoins: Patterns in Bear Markets
Bitcoin’s performance in bear markets often sets the tone for the broader cryptocurrency market. Notably, during the 2018-2019 ‘crypto winter,’ Bitcoin’s value plunged from around $19,000 to nearly $3,200, reflecting a significant market downturn.
This period was marked by regulatory concerns and a general loss of investor confidence in cryptocurrencies.
In comparison, key altcoins followed this downward trajectory but experienced more pronounced volatility. For instance, Ethereum and Ripple saw drastic declines in their values, often outpacing the percentage drop of Bitcoin.
This trend suggests that while Bitcoin’s bear market movements significantly influence the altcoin market, the impact on altcoins can be more severe due to their lower market capitalizations and higher volatility. Such patterns highlight the interconnected nature of the cryptocurrency market, with Bitcoin’s performance being a critical indicator for altcoin behavior during bear phases.
Trailing and Surpassing BTC
Many altcoins start off by trailing Bitcoin’s bullish trends. But then, historically, altcoin season sets in and many altcoins surpass BTC growth rate. This may happen because of:
- Technological Innovations: Altcoins like Ethereum introduced unique functionalities such as smart contracts, fostering a new realm of applications.
- Market Niche: Some altcoins target specific market niches, gaining traction in areas where Bitcoin might not be the primary focus.
- Community and Developer Support: Robust community engagement and active development can lead to increased adoption and investor confidence.
- Scalability Solutions: Altcoins that offer scalable solutions can attract significant interest, especially during periods when Bitcoin faces scalability challenges.
- Investor Sentiment and Speculation: The smaller market cap of altcoins can lead to higher volatility and potentially larger percentage gains.
Source: The Motley Fool
The above graph shows major altcoins trailing and then surpassing BTC growth rate in the 2020-2021 bull market.
Ethereum (ETH) initially followed Bitcoin’s rise but then experienced an explosive growth rate, especially with the DeFi boom. It surged from around $130 to approximately $4,362, a growth significantly higher than Bitcoin’s in percentage terms.
Solana (SOL), a newer entrant, trailed behind initially but saw a phenomenal rise from around $0.50 to $70, far surpassing Bitcoin’s percentage growth.
These instances demonstrate how the altcoin season kicks in. Certain altcoins, initially following Bitcoin’s lead, can experience surges due to their unique market positions, technological advancements, and investor sentiment, leading to outperformance in percentage gains.
Market Insights and Predictions
As we navigate the beginnings of another bull run, catalyzed by factors like the BTC spot ETF and the upcoming Bitcoin halving event, it’s crucial to look at market trends and potential performers.
Bitcoin, at the time of writing at $41K, continues to be a key market driver. For investors, diversifying into promising altcoins or better yet a rebalancing platform could be strategic.
Historical data suggests that altcoins often see amplified gains post-Bitcoin rallies. So this is the time to invest and make big returns.
An informed strategy is necessary here, one that balances blue-chip crypto investments with emerging coins for profit maximization in crypto investments. You need to consider the unique market dynamics and technological innovations driving each asset.
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Why Altcoins Rise Faster than Bitcoin in Alt Season
The altcoin season phenomenon can be observed in both BTC bull runs of 2017 (when BTC reached $20K in December) and then again in 2020-2021 (when BTC rose to $60K in April 2021).
There are a few reasons why this happens.
- Market Sentiment and Speculation: Bitcoin often acts as the trendsetter for the broader cryptocurrency market. When Bitcoin’s price rises, it typically boosts investor confidence and market sentiment across the entire sector. Investors, encouraged by Bitcoin’s success, are more inclined to invest in altcoins, which are perceived as having higher growth potential due to their lower market caps compared to Bitcoin.
- Increased Liquidity and Market Entry: A rising Bitcoin often attracts new investors and capital into the cryptocurrency market. Once these new participants are engaged, they may look beyond Bitcoin to diversify their investments, thereby flowing into altcoins.
- Risk and Reward Dynamics: Altcoins, being generally more volatile and with smaller market capitalizations than Bitcoin, have the potential for higher returns (albeit with higher risk). During a bull run, investors might be more willing to take on this additional risk for the chance of higher rewards, accelerating the growth rate of altcoins.
- Technological and Development Factors: Sometimes, the rise in altcoins is driven by specific technological advancements or positive development news related to particular projects. Investors might perceive these altcoins as potentially overtaking or providing better solutions than Bitcoin in certain aspects.
- Decoupling Trends: Although many altcoins initially follow Bitcoin’s trend, there are periods where certain altcoins decouple and experience independent price movements based on their own merits, community support, and use cases.
- Bitcoin’s Market Dominance Fluctuations: The concept of “altcoin season” describes periods when altcoins outperform Bitcoin. This typically happens when Bitcoin’s dominance (its share of the total cryptocurrency market cap) decreases, and the capital flows into altcoins.
If you’re looking for the best altcoins for alt season, keep an eye on the market for breakout coins and move promptly.
Bitcoin often leads market trends, but altcoins have shown the capacity to not only follow but also surpass Bitcoin’s growth, particularly in bull markets.
This pattern highlights the importance of investing in altcoins ASAP, since the altcoin season is right around the corner.
My suggestion would be that investors approach this decision with an eye on market trends. Do their due diligence before making a decision.However, I recommend R100K as the go-to platform to optimize your crypto investments. You can read my full review of the R100K platform here.