What is Altcoin Season? Signs of the coming Altcoin season
What is Altcoin Season? What are the signs to recognize Altcoin Season? How to increase wealth and minimize losses during Altcoin season.
If you have participated in cryptocurrency investment, you must know two words - Altcoin season. So what is Altcoin season? Why are so many investors looking forward to it? How to profit from Altcoin season? All are answered in this article.
But first of all, if you are a newbie, you need to understand what is Altcoin?
What are Altcoins?
Altcoin is an abbreviation of Alternative Coin, which is a term for non-Bitcoin (BTC) coins, including ETH. The characteristic that people often talk about when talking about Altcoins (and probably the most favorite reason), is the low capitalization.
Currently, the capitalization of BTC is over $800B, but most of the altcoin capitalization ranges from a few million to several billion. Therefore, many investors look to Altcoins for high returns, even though the risks are not low.
What is Altcoin Season?
Altcoin season (or Altcoin season) is a time when Altcoins simultaneously increase very strongly with profits of x2, x3 or even x10 times in a few weeks. The most typical is the Altcoin season in September 2017, when you closed your eyes to buy a large Altcoin, any of your assets increased very quickly after that.
Signs of the coming Altcoin season
After many times observing the Bitcoin season, I have concluded that there are two prerequisites to help you realize whether the Altcoin season has come or not, that is:
- Bitcoin Dominance must DOWN.
- Cash flow must shift to Altcoins.
- The capitalization must fluctuate slightly or increase.
Bitcoin Dominance Drops
Bitcoin Dominance aka Bitcoin's market capitalization dominance rate in the cryptocurrency market. For example, BTC Dominance is at 60%, this can be interpreted as BTC capitalization is 60% of total market cap and Altcoins is 40% of total market cap.
When BTC Dominance increases, it shows that investors are more inclined to hold Bitcoin than Altcoins, so Altcoins will tend to decrease because investors sell Altcoins to BTC.
When BTC Dominance is trending down, two cases will happen:
- Investors are tending to sell BTC to USD or USDT.
- Investors are tending to sell BTC to invest, buy into Altcoins.
Therefore, a decrease in Bitcoin Dominance rate is considered a necessary condition for an Altcoin season to begin.
Cash flow moves to Altcoin
According to my observations, there will be three scenarios of capital movement in the cryptocurrency market. Including:
Scenario 01: BTC » Altcoin Top » Mid-cap/LowCap (most common):
- Money is pouring in to push up the Bitcoin price. At this point, USD or USDT holders start buying BTC to push up the price of BTC.
- After that, BTC stalled sideways or had a slight downward trend (correction), at which time capital was flowing from BTC to the top Altcoins (large Cap), causing the price of these tokens to increase by 30 - 50%.
- Finally, the capital will be poured into mid and low cap coins. While these Altcoins pump, BTC will be pumped or dumped strongly causing the sell-off to happen, this is also a way to end the cycle that makes many brothers become reluctant holders.
Scenario 02: Midcap/Lowcap » Altcoin Top » BTC:
- Bitcoin will be mostly flat and volatile. At this time, capital was pushed into the Altcoins of the midcap and low cap types with very strong pumps, x2 x3 within 1-2 weeks.
- At this time, investors began to see fomo pouring money from USDT into buying Altcoins that were pumping.
- But unfortunately, capital will then flow back to the top Altcoins and eventually back to BTC, causing BTC to pump strongly and then a sell-off that ends the cycle of capital.
See more: How to avoid being FOMO, FUD when investing in cryptocurrency
Scenario 03: This is the best and most ideal scenario, only happens when there is a large capital inflow into the market. At this time, if you close your eyes and buy big, you will also be profitable because the capital is too large and will flow to every corner of the market. From BTC to Altcoin and lowcap will pump very very strongly.
In short: You need to observe the BTC Dominance index and the scenario of capital flows in the market to be able to catch the Altcoin wave season.
Signs to identify Altcoin season
Example: Altcoin season in January to February 2020.
After the BTC price rallied from $7,200 to $8,150, BTC Dominance surged to 70.52% then started a bear cycle, albeit with a slight increase in price.
This is the first step signaling Altcoin season. Immediately after the BTC pump attracted the attention of investors. During this period BTC increased but ALT/BTC did not drop sharply, causing the price of ALT/USDT to increase slightly according to BTC.
The next stage (from January 25, 2020 - February 14, 2020) capital flow began to be poured into Altcoin TOP and Midcap and lowcap, causing the price of these Altcoins to increase very strongly by 100% - 200% a lot.
Meanwhile, the Bitcoin price has only increased slightly by 25%. After that, BTC collapsed and all Altcoins collapsed ⇒ End of Altcoin season.
- Rising Altcoins: Example with Tezos (XTZ)
- Bitcoin is up slightly.
Market capitalization fluctuates insignificantly or increases
In fact, the decrease in BTC.D is not exactly an indicator of money flowing into Altcoins, but more precisely: money is being withdrawn from BTC.
What if the cash flow is withdrawn but cashout? Or is this cash flow not going anywhere, just waiting for a position?
The above causes the capitalization of BTC and Altcoins to decline. As a result, both BTC and Altcoins “evaporated”.
How long does the Altcoin season last?
There is no set standard for the duration of an Altcoin Season. However, based on history, an Altcoin season lasts about 2-3 months. The closest example is probably around early 2021 (around March - May).
At this time, BTC.D broke 60% and gradually approached the peak of about 39%. Altcoins are all flying x2 x3 compared to the price at the beginning of the year. In particular, some large potential Altcoins already flying before March can be up to x10 at that time.
Example: January 2021 SOL coin cost around $5 - 6. But at its peak, SOL was around $60.
Risk of Altcoin Season
Around this time, Altcoins pump strongly, so why take the risk? That's because many investors are so "drunk" with winning that they forget the fact that unfinished money is not their money, but just numbers that know how to "dance".
No one knows how long such a season will last, and so on, investors want to go up, only to be taken advantage of by wiser people first. From winning to losing in an instant.
After that, they still thought it was a retracement so they still held their losses. Until really divide 5, divide 10, then only cut losses in regret.
In addition, there is still another effect that is standing on this mountain looking at that mountain. This case is also very common when the Altcoin season begins, that is, the token I hold does not increase, but the token next to you increases rapidly. Can't stand it, cut this side and jump to the other side, but immediately met the adjustment. My son bought it at first and started to increase.
The result of this "jumping boat" is that the account keeps decreasing, investor psychology is in crisis.
The next equally important thing is that on the occasion of Altcoins flying, scam projects also began to be drawn up, luring inexperienced investors to buy. As a result, it was impossible to take profits, and that money was lost forever, in exchange for a bunch of useless tokens.
See also: Be proactive in all market situations
Altcoin Season Experience
What to do to increase assets fastest in Altcoin season?
Once you have identified the signs that the Altcoin season is about to begin, you need to do the following:
- Determine the stage of the capital flow in which scenario, which stage.
- Review the coins into which capital will flow.
- Analyze the chart and choose 1-2 coins to buy.
- Make a trading plan: Entry point, exit point, stop loss, capital, risk management, expectation management... and conduct the transaction according to the plan.
- After reaching the target, Flip through the Altcoins that have not been pumped to take advantage of the power of compound interest.
If you feel that the above is too complicated, please refer to more about how to recognize the movement of money flow through groups of coins through the following Podcast: Money flow in the macro
How to avoid losses during Altcoin season?
To minimize losses during the Altcoin season, you need to:
Know how to stop at the right time: Altcoin season comes, which means that investors get huge profits. But in the process of taking profits, you need to know what your profit-taking purpose is. And this number must be reasonable, not just a special number for fun like x100 or x1000 but must be based on knowledge and analysis.
Read the project carefully: To avoid being scammed, we need to understand how the project we are about to spend money on, is there a risk of scam, etc. Here are a few project filtering tips that can help you avoid get scammed:
- The project team has a bad history.
- The website is sketchy, over-the-top, the font is out of sync.
- Multi-level strong scent.
- There are no community channels like Telegram, Twitter, or if there are, they are not professional, few real people are active.
- The admin team, the project team draw a specific price in the future. For example: Project X promises a list of Uniswap for $ 1, 3 months later to Binance for $ 5, …
Conclusion
Altcoin season is always the happiest, most exciting time of the crypto market with pumps x2 x3 x10 times assets. But one person's joy will be another person's sadness when they are FUCKED just because they don't understand the nature of the Altcoin season .
In addition, making money is easy but keeping money is not necessarily easy, you need to be careful when you get a certain amount of profit. Have you ever been swinging to the top or selling the bottom of Altcoin season? Please share your experiences in the last Altcoin season in the comments section below!
Oct 11, 2022
