It looks like we are on the precipice of yet another altcoin season–one of the top market cycles that commands attention and excitement. In this blog, we break down what it means, what you can expect, and what’s next.

Altcoin Season Almanac

Altcoins are, by definition, alternative currencies to Bitcoin that can be categorized as smart contract platforms, exchange tokens, DeFi tokens and more. Altcoins have gained extraordinary popularity in the crypto market as investors see opportunities to invest in up-and-coming, highly volatile projects with strong potential.

Altcoins make up over 40% of the crypto market with over 5,000 currently traded worldwide. The altcoin market encapsulates a huge variety of assets, from brand new decentralized finance applications to multi-billion dollar blockchains with thousands of developers contributing to their growth.

Not all altcoins are created equal and, while some are truly disruptive technologies, others are simply built around memes or trends. As investors do their own research to pick the most exciting and promising altcoins they hope will outperform Bitcoin, we can assure you that the altcoin season hype is not to be underestimated.

What is Altcoin Season?

Despite its volatility, Bitcoin (BTC), the tried-and-true original crypto asset, is usually the barometer by which investors measure the market because of its reliable prominence as the pioneer of the cryptocurrency world.

To understand altcoin season, it’s essential to understand how altcoins react to Bitcoin’s price action.  Altcoins are often traded against the BTC pair, so when Bitcoin surges in price, altcoins, in comparison to BTC, drop in value. As Bitcoin takes center stage, investors often make the risky decision to sell their altcoins to consolidate into Bitcoin with the hopes of protecting their Bitcoin position and buying back altcoins at lower prices.

Similarly, when Bitcoin experiences a short-term or longer-term correction in price, altcoins often dip further than Bitcoin, which has a history of being more stable in price. In the last bear market, we saw value fall around 80% in Bitcoin and around 95% or more for altcoins. With more and more altcoins maturing, growing in market capitalization and having features such as DeFi, staking, and fast transactions, many investors expect to see a greater long-term prominence of altcoins.

Many crypto investors choose altcoins with the hope of building their Bitcoin or USD position when they take profits, and intend to use these market trends to their advantages.

Bitcoin Dominance

Now onto Bitcoin dominance, which is not an exact science but has become the lead indicator utilized to measure crypto market cycles. Altcoin Season is marked by a surge of altcoin investments that outperform Bitcoin over a period of time. When Bitcoin’s dominance falls in the market, it’s due to the rise of money flowing into altcoins, as well as more capital being spread across all the hundreds of new coins entering the market.

Bitcoin dominance was as high as 69% in 2020, but has since broken below 50% for the first time since the altcoin mania we saw in 2017 and 2018.