If you’re familiar with the crypto sector, you know that earlier, when Bitcoin’s price increased, altcoins trailed behind. Bitcoin is the asset with the highest market capitalization in the sector and has the power to attract the public’s attention and grab the largest share of the capital that is poured into the sector. However, over the last few cycles, we noticed that investors tend to start looking for ways to diversify their investments when it reaches the highest level of dominance because Bitcoin’s spike in value causes the other projects to move upward. Surprisingly, 2024 has broken the pattern because while Bitcoin entered the bull run, altcoins seem to advance at a slower pace. So, investors cannot help but wonder what factors will drive a bull run for altcoin this time.
Crypto specialists believe that crypto enthusiasts might have to wait some more for the altcoin season because while Bitcoin is bullish, the other cryptocurrencies seem to have a more challenging road to reach the necessary level of high dominance.
Render, one of the most interesting altcoin projects has recorded a small value appreciation over the past few months, if you check the Render to USD price trend, but it has more potential to gain value if the altcoin market enters the bull season.
Let’s Discuss the Altcoin Season
At the beginning of 2024, crypto markets entered an upward trend, and digital currencies have recaptured investors’ attention after two years when they had become hesitant to add cryptocurrencies to their portfolios.
Bitcoin performed pretty well during the year 2024, while the last part of the year was very good for the digital currency because it reached its new all-time high of $108,268.30 USD.
And while in the past, investors would have split their attention between Bitcoin and altcoins, this time, they seem to stay focused on Bitcoin. The altcoin season usually offers investors lucrative opportunities to make a profit because, during this period, digital currencies outperform Bitcoin, and their prices increase steadily. The reason investors can predict when an alt season is beginning is because the market experiences an uptick in activity, and the overall feeling among investors regarding altcoins is positive, with a rise in the trading volumes of digital currencies. However, it’s not very easy to determine when a new altcoin season is about to begin since the crypto industry is rather volatile, and such events are determined by multiple factors.
Altcoin seasons come in different forms and lengths. While they present investors with varied opportunities to get a return, they can put their portfolio under risk because of the volatility marking them.
Does Bitcoin Have Such a Great Impact on the Altcoin Season?
Bitcoin dominance is the market capitalization of Bitcoin as compared to the entire crypto market. Throughout history, whenever there was overall uncertainty or a bearish attitude in the markets, the Bitcoin dominance level remained high. As investors try to find “safe havens” in this rather volatile cryptocurrency space, the number of Bitcoins over the entire altcoin market keeps remaining high. It has always been an indicator for the start of the altcoin season in previous years.
During Bitcoin bull runs, its dominance often increases first and absorbs most of the market’s liquidity as the leading asset; but once it peaks or slows down in price growth, investors begin to look for alternative coins that have the possibility of growth.
This will create a reallocation of capital from Bitcoin to altcoins, and an altcoin season will arise wherein other cryptocurrencies begin to outperform Bitcoin.
The “Bitcoin Cycle” and Altcoin Season Timing
The “Bitcoin cycle” is the price pattern of Bitcoin in response to various market forces, especially its halving events, regulatory changes, and macroeconomic factors. The Bitcoin price cycle generally starts with an accumulation period, followed by a bull run, and finally, a correction or bear market. Each phase of this cycle influences the occurrence and timing of altcoin seasons. The bull phase generally captures all the attention and capital during its price appreciation.The initial jump in Bitcoin prices usually sets up a strong uptrend, and new and existing investors start entering the cryptocurrency space. When Bitcoin begins to top out, some investors seek more aggressive returns by taking their capital into smaller altcoins, which usually leads to an altcoin season.
Different altcoins have seen extreme price growths because investors are looking for diversification away from the stabilized growth of Bitcoin.
Investor Psychology and Shifting Market Sentiments
Investor psychology is a highly central aspect of the relationship between Bitcoin and altcoins. During the bull runs of Bitcoin, more significantly in its early stages, investors will show attention to Bitcoin since it is judged to involve lower risk compared to altcoins. Once Bitcoin prices level off or have begun to plateau, risk appetites tend to increase among investors, who throw their money toward altcoins for potentially higher rewards.
This occurs partly due to the “fear of missing out” (FOMO), as investors search for gains and profit from perhaps explosive altcoin appreciations.
So, an altcoin season largely represents the seeking of yield beyond Bitcoin as well as enhanced confidence in the broader cryptocurrency market in general.
Liquidity Flows and Market Maturity
Bitcoin is the primary entrance and exit point for capital in this crypto-currency market, and many investors are purchasing Bitcoin as a gateway for entry before expanding into other crypto-currencies. This sets up a flow of liquidity out of Bitcoin into alt-coins, which becomes pretty pronounced at altcoin season where Bitcoin liquidity feeds altcoin trading volume to maximize altcoin price.
The role of Bitcoin as a liquidity anchor gets more complicated in a mature market. Other leading altcoins or stable coins can now serve as entry points to the market for newer investors or even direct access through decentralized exchanges. Nonetheless, Bitcoin remains significant in terms of influence on liquidity patterns.
During the altcoin seasons, traders make frequent use of Bitcoin as collateral in decentralized finance platforms to further invest in other altcoins in the hopes of capitalizing on increases in their price. But liquidity in altcoins can also contribute to quick price volatility and flash price drops. A sharp correction or crash in the price of Bitcoin will often send investors out of altcoin positions to protect capital, and it can cause sharp drawdowns throughout the altcoin market. While Bitcoin’s rising price may set off an altcoin season, it is often a harbinger of the end of one, which means that its falling price plays a dual role as both a trigger and stabilizer.
Summary
Understanding the dynamics of interaction between Bitcoin and altcoin seasons can offer worthwhile insight for individual investors and analysts alike. It will make investors better equipped in terms of navigating all the volatility and cyclicality of the cryptocurrency market.
