The cryptocurrency economy is known for its volatility and cyclicality. Traders and investors constantly seek opportunities to profit from market changes. One of the most exciting periods for the crypto community is the altcoin season, when alternative cryptocurrencies grow faster than Bitcoin.
What is the altcoin season?
The altcoin season is a period when most altcoins show significant price increases, outperforming Bitcoin's profitability. This occurs due to changes in liquidity flows and shifts in investor sentiment, who begin to allocate more funds to altcoins instead of BTC.
Key signs of the altcoin season:
Decline in Bitcoin dominance (BTC.D) in the market
Increase in market capitalization and trading volume of altcoins
Explosive growth in the value of many crypto projects over a short period
Increased interest in new sectors (DeFi, NFT, AI tokens, etc.)
The altcoin season is an important stage of the crypto market, opening up opportunities for significant profits, but at the same time requiring caution, market analysis, and effective risk management.
The largest altcoin seasons
The altcoin season existed even in the early stages of the crypto market, but the first large-scale altcoin seasons occurred in 2017 and 2021. They had their unique features that significantly impacted the crypto industry.
2017: ICO boom and the first major altcoin season
In 2017, there was an explosive growth of altcoins, particularly due to the ICO boom. Ethereum (ETH) played a key role in this process, as most ICOs were launched on its blockchain. ETH itself rose from about $10 at the beginning of the year to over $1,400 in January 2018.
Many other altcoins, including Ripple (XRP), Litecoin (LTC), and Cardano (ADA), also showed astronomical growth. This season ended with a crash in 2018, when many ICOs turned out to be fraudulent, and regulators began to actively intervene in the market.
2021: DeFi, NFT, and a new era of altcoins
In 2021, the altcoin season was driven by the DeFi boom (Uniswap, Aave, Compound) and NFTs (OpenSea, Axie Infinity, Decentraland), which attracted massive investor interest. The popularity of meme coins (Dogecoin, Shiba Inu) increased thanks to social networks and public figures like Elon Musk. The global growth of the crypto market and blockchain infrastructure was supported by large corporations, but by the end of the year, the market experienced a correction due to increased regulations and macroeconomic factors.
These periods were triggered by waves of market capitalization and the emergence of new investors, leading to a surge in cryptocurrency liquidity. At the same time, the cyclicality of the crypto market manifested: after periods of growth, corrections follow, making prudent risk management critically important for investors.
What are liquidity flows?
The crypto market is highly volatile and develops cyclically, which means periodic growth and decline in the activity of various asset classes. Liquidity flows are the movement of capital between Bitcoin, Ethereum, altcoins, and stablecoins, determining market dynamics.
Understanding the flows of cryptocurrency liquidity and market cycles helps identify optimal moments for entering and exiting the market. It is important to monitor BTC dominance indicators, ETH dynamics, and the overall market trend to effectively capitalize on cryptocurrency investment opportunities in altcoins.
Analyzing cryptocurrency market cycles helps avoid mistakes associated with emotional decisions and allows for more effective capital allocation. Timely exits from altcoins and transitions to more stable assets can help preserve profits.
4 phases of cryptocurrency flow
The cryptocurrency market develops cyclically, and liquidity in the market flows between different assets according to a specific scenario. Understanding market phases can help in making informed decisions.
There are 4 main phases:
Accumulation phase (Bitcoin Season): large investors buy BTC after a bear market, gradually restoring confidence. Trading volume increases, but cryptocurrency volatility remains low.
Ethereum growth phase (ETH Season): part of the capital shifts to ETH, which outperforms BTC due to active use in DeFi, NFTs, and smart contracts.
Altcoin season phase: investors allocate funds to altcoins that demonstrate explosive growth, especially in the fields of DeFi, metaverses, and AI tokens.
Profit-taking and correction phase: investors convert profits into BTC, stablecoins, or fiat; altcoins decline, and the cycle begins anew.
Understanding these phases allows for more effective investment management, timely entry into promising assets, and profit taking at market peaks. It is important to monitor market signals and not succumb to the fear of missing out, to avoid losses during corrections.
How to understand that the altcoin season is near?
The altcoin season is a period of rapid growth of altcoins, which can be predicted by the following market signals:
Decline in BTC dominance (BTC.D): when Bitcoin's market share decreases, cryptocurrency liquidity in the market begins to flow into altcoins.
Rapid growth of ETH: Ethereum usually rises before altcoins, signaling an upcoming altcoin season.
Increase in altcoin capitalization: a significant influx of funds into the cryptocurrency market and an increase in trading volume.
Hype in media and social networks: active discussion of altcoins, new sectors (DeFi, AI, metaverses), and meme coins.
Growth of small altcoins: if even lesser-known projects begin to show high profitability, this signals the peak of the altcoin season.
Analyzing BTC dominance, ETH growth, and market activity will help timely recognize the beginning of the altcoin season and take advantage of its opportunities.
Common mistakes of the altcoin season
The altcoin season opens up opportunities for high profits, but emotions and the lack of a well-thought-out strategy often lead to financial losses. Common mistakes during the altcoin season are caused by the following factors:
Lack of exit strategy - many investors do not lock in profits in time, waiting for even greater growth.
FOMO (fear of missing out) - buying assets at their peak based on emotions and without market analysis carries high risks.
Ignoring risks - investing in altcoins without fundamental analysis can lead to losses.
High leverage trading - margin trading altcoins can quickly liquidate positions during corrections.
Underestimating Bitcoin's influence - if BTC starts to decline, altcoins may lose even more.
To avoid these and other common mistakes, it is important to control risks, not give in to emotions, and have a clear market exit plan.
How to prepare for the altcoin season on Binance?
Thus, the altcoin season can bring profits to investors, but only with proper preparation. The right strategy will help maximize market opportunities and reduce risks in the cryptocurrency market, including the following stages:
Market research - analyzing promising projects and sectors (DeFi, NFT, AI, Layer-2)
Portfolio diversification - distributing investments among different categories of altcoins to reduce risks
Using stop-losses and take-profits - automatic position closure helps lock in profits and minimize losses
Market monitoring - tracking BTC dominance, cryptocurrency trends, and investor sentiment
Passive income - staking, farming, and other Binance Earn tools during the wait for market growth
Risk management - investing amounts that do not exceed what you are willing to lose
As we can see, market research, portfolio diversification, risk management, and utilization allow for effective preparation for the altcoin season and avoidance of common mistakes. For its part, Binance tools provide all the opportunities to build safe strategies.
