Altseason is a period during which altcoins (all cryptocurrencies excluding Bitcoin) demonstrate significant growth relative to Bitcoin and the US dollar (or stablecoins like USDC, USDT). Altseason arises for various reasons, and it is possible to predict it with a certain degree of probability. I have detailed this entire process in the article below.
What is Altseason?
The altcoin season is the time when liquidity flows from bitcoin to altcoins. This spillover occurs along with a decline in Bitcoin’s market dominance and an increase in the dominance of altcoin capitalization. Most altcoins are growing, establishing new ATHs and surpassing Bitcoin in terms of growth percentage and profitability.
Capital Flow
Altseason always follows a Bitcoin season. This happens because the growth in Bitcoin gradually loses its potential to reach new highs, as profits realized from BTC can be transferred to altcoins for additional gains.
At the same time, many other market participants notice that altcoin prices begin to rise, especially when compared to BTC, and they also engage in this movement to not miss out. This creates an effect of increased demand for altcoins, pushing their prices higher until the capital flow ends.
Predicting how long an altseason might last is practically impossible, as each growth period differs from the previous ones.
This entire process can be summarized in a single picture, shown below.
Let’s examine each phase of the altseason and capital flow in more detail.
Phase 1 → Phase 2
After Bitcoin has grown significantly (for various reasons) and reaches ATHs, it starts to correct, and Ethereum steps in, showing impressive growth against this backdrop. All this happened against the background of two factors: a decrease in BTC dominance and an increase in ETH dominance.
Phase 2 → Phase 3
After Ethereum reaches ATHs, it enters a consolidation phase, as happened in May 2021. During this time, attention shifts from Ethereum to large-cap altcoins — approximately the top 100. And during the next rise of ETH, when ETH aims for new highs, the top altcoins reach their maximum values. It is very difficult to predict which of these top altcoins will set ATHs, but it is evident that the majority of altcoins will do so within a ±3 month range from Ethereum’s ATH.
Phase 3 → Phase 4
After the top altcoins have completed their main movements, attention turns to the remaining altcoins, which mainly show double or even triple-digit growth towards the end of the altseason.
Best Altseason Indicators
BTC Dominance
This indicator represents the ratio of BTC’s market capitalization to the market capitalization of all cryptocurrencies, multiplied by 100 and expressed as a percentage. When BTC dominance decreases, it means that either altcoins are falling less on average than BTC, or altcoins are growing more than BTC. The figure below shows in more detail all the possible movements of BTC dominance, BTC price, and altcoins.
The most attractive situations for BTC growth are cases 4, 7, 8, in which altcoins on average grow as much as BTC or stronger.
To track BTC dominance, one can use the BTC.D chart on Tradingview. It defines BTC.D as Market Cap BTC / Crypto Total Market Cap * 100%. BTC.D on Tradingview more reflects the dynamics of changes rather than showing the real value, as TOTAL is calculated based on the top-125 cryptocurrencies, not all of them.
ETH/BTC Ratio
Another important indicator of altseason is the increase in the ETH/BTC ratio. When Ethereum significantly outperforms BTC, it may indicate capital flow from BTC to ETH. Ethereum’s growth is also mostly accompanied by the growth of other altcoins. TOTAL3 in the figure below represents the market capitalization of the top-125 cryptocurrencies excluding the market capitalizations of BTC and ETH.
Altseason Index
The website Blockchaincenter.net presents an altseason index, which is the percentage of coins from the top 50 by market capitalization that have shown growth over 3 months greater in percentage than BTC. If this indicator is above 75, it is considered to be altseason; if below 25, it is considered to be BTC season.
The most interesting moments are when the indicator confidently rises to 90% or higher and stays there for some time. These days accurately reflect a positive dynamic for altcoins.
If the index rose above 75% but did not stay there, it means that BTC is still stronger than the market, and it was a false breakout.
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To be less affected by market fluctuations, one can switch to the altseason index that measures annual return. When the indicator trades at a level of 25% and below, it is an excellent opportunity to accumulate cryptocurrencies that show a lower annual return than BTC. After some time, these cryptocurrencies will outperform BTC in terms of profitability.
There is also a third version of this index, which considers monthly return, but this version of the indicator contains too much noise and often fluctuates from low to high values.
Fear and Greed Index
The Fear and Greed Index is measured based on various indicators and takes values from 0 to 100 (more details here). The last time this indicator reached a value of 90+, it signaled the start of the main phase of the bull market and altseason. During such high values, extreme greed prevails in the market, pushing prices to new ATHs.
Low values of the index mean good zones for buying altcoins with a part of the capital, as low values of the index do not always coincide with local lows for altcoins.
Stablecoins Capitalization
The growth of stablecoin capitalization directly affects the altcoin season, as it increases liquidity in the crypto market and facilitates access to cryptocurrencies without the need for exchanging fiat money. This eases the flow of capital between assets. The increase in stablecoin capitalization is seen as a sign of growing interest in the crypto market as a whole, which promotes speculative interest in altcoins. Investors who have earned on Bitcoin may redirect funds to altcoins to increase returns, which boosts demand and pushes altcoin prices up.
During the main phase of the 2021 bull market, there was a strong increase in the number of stablecoins on the market, which increased the purchasing power of market participants. After the strong growth, there was a smaller increase, during which capital flowed from Bitcoin to altcoins.
Further sideways movement of stablecoin capitalization and its decrease was accompanied by a decrease in interest in the crypto market and a drop in cryptocurrencies during the bear market phase.
Current Situation Analysis
Analyzing BTC.D on a monthly timeframe, it is clear that BTC.D has been in a positive trend since December 2022: a 32% increase. At the same time, BTC itself has grown by 200%+ during the same period, while TOTAL3 has only increased by 85%. Based on the scheme above, this more closely resembles situation 1, in which, on average, altcoins grew less than BTC.
BTC has already reached values observed in December 2021, while altcoins, on average, lag behind and have only reached values from May 2022.
The ETH/BTC ratio continues to hover around a key value: 0.05. Since December 2021, there has been a negative trend, and ETH is still undervalued relative to BTC.
The altseason index shows that it falsely breached the 75% mark, not confidently as it did in March 2021 or August 2022.
The altseason index, taking into account annual returns, is still at low levels. BTC continues to dominate the crypto market among top altcoins in terms of annual returns.
The Fear and Greed Index over the last year reached a maximum of 79, indicating that the main phase of the bull market has not yet occurred, and the maximum greed in the market is still ahead.
Since October 2023, there has been an increase in the total capitalization of stablecoins, but this value is still less than it was at the peak of 2022.
Conclusion
The market has revived after a prolonged bear phase. Some altcoins have rebounded nicely from their lows, but BTC continues to dominate the market, holding a large part of the liquidity. Ethereum has yet to show its potential relative to BTC and has excellent prospects for growth in the future. Despite the rebound, the majority of altcoins are still far from their peak values, and their annual returns may be inferior to those of BTC. The maximum greed that occurs in the main phase of the bull market is not observed, as this phase has not yet started. Interest is beginning to return to the market, but it is still not at the level of past BTC peaks. It turns out that the real altseason has not yet arrived, and it awaits us in the future.
