Altcoin Season
When Altcoins outperfom Bitcoin
TLDR:
Altcoin Season (or Alt Szn) is when Altcoins shoot up in price and we see the majority of major Altcoins outperform Bitcoin.
Historically Altcoin Seasons have occured in bull market periods where Bitcoin’s price has shot up then remained relatively stable, as in the past few months.
However, in the past month we’ve seen the opposite with Alts dropping. Perhaps there are just too many Altcoins now for Bitcoin gains to flow into them all.
The future’s uncertain, we may get a full blown Altcoin Season again or we may just see mini Altcoin Seasons focused on different crypto subsectors from now on.
The crypto market’s sentiment has been split recently with Bitcoiners feeling really excited about the market, while most of the rest of crypto being a bit down in the dumps after a lot of negative press and negative price action.
Everyone’s been waiting for Altcoin Season, but it hasn’t really arrived yet, so today I’m taking a look at what Altcoin Season actually is and whether we’re ever going to get another one.
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Altcoin Season
Trump’s inauguration certainly marked a “local top” in the crypto market with the price of most crypto’s moving higher and higher in the months leading up to the inauguration and collapsing further and further down ever since.
Interestingly though Bitcoin’s price has held strong and not fallen along with the rest of the market, keeping in the price range somewhere between $90k to $110k for the past few months.
This has been an unusual situation as Bitcoin and Altcoin prices have historically moved together. In fact, usually when Bitcoin’s price crabs sideways for a bit, as we’ve seen this past couple of months, you tend to get what people call an “Altcoin Season” or in more degen terms “Alt Szn”.
Altcoin Season is essentially where the majority of altcoins shoot up in price and we see most Altcoins outperform Bitcoin. In this period we see generalised positive price action around pretty much the entire crypto market.
However, we haven’t seen much of an Altcoin Season yet, in fact we’ve had the opposite with Altcoin prices and general sentiment in the market tumbling further and further as the space has been marred with controversy with the most recent being the Libra memecoin - meanwhile Bitcoin has held strong.
So people are now asking: Will we ever see an Altcoin Season again?
This is a great question, let’s analyse it further.
Past
Historically in past bull markets we’ve seen Bitcoin price rally upwards by sucking up liquidity from other tokens that either drop in price or stagnate.
Once Bitcoin’s done sucking up liquidity to push it up to new heights, it begins it’s consolidation phase where it tends to crab sideways maintaining the price relatively stable.
In this period of time Altcoins often rally and this is when we enter Altcoin Season where the majority of Altcoins outperform Bitcoin. Whereas Bitcoin may have done a 1.5x-2x growth in it’s rally, while some of the Alts tend to jump up in price much more!
In this period it seems like all the gains from Bitcoin flow out into the Altcoin space and the rising tide lifts all boats. Everyone feels like a winner here, both Bitcoin holders and Altcoin holders.
It’s exactly this moment that most of the space has been waiting for in the past several months.
Present
However, during the past couple of years ever since we got out of the horrible bear market of 2022 marked by huge crashes like Terra-Luna, FTX, Celcius and more, we’ve seen Bitcoin grow steadily higher and higher from as low as $17k in early 2023 to $100k in the past few months.
Yet in that same, we haven’t seen any corresponding Altcoin Season where the rising tide has lifted all boats.
Instead, we’ve seen a massive growth in memecoin gambling over in the Solana ecosystem with memecoins becoming a huge part of the space. Plus we’ve seen small pockets of specific narratives, like Ordinals and AI Agents, get their time in the limelight then have their interest fade away and prices fall along with them.
And in the most recent months we’ve even seen Bitcoin hold really strong and crab price-wise while the entire Altcoin market has fallen out around it.
One particular measure that helps to think about how well Bitcoin is doing against Altcoins is “Bitcoin Dominance”, which reflects how much of the overall crypto market is represented by Bitcoin’s market-cap alone. And as you can see below this has been steadily rising and rising!
There’s many theories here as to why this has happened. Two of the strongest theories that I’ve seen are:
We’re at the point now where there’s an infinitely large supply of new tokens and coins in crypto, with thousands of new tokens being created every single day. So there’s just too many coins now and it’s no longer possible for the Bitcoin tide to lift up all boats.
Bitcoin has grown to a new level of financial importance with the introduction of ETFs and other tools in the traditional financial (TradFi) system, where it’s no longer subject to the same mostly speculative forces of the crypto market, and has begun to align itself more with TradFi.
There’s also still the possibility that this is just a momentary blip and we’ll still come back to see booming Altcoin Seasons once again.
Future
Let’s start by saying the obvious, which is that the future is impossible to predict.
However, if we were to take a guess I’d say we can see a few possible futures emerging.
We’ve not actually been in a full blown bull market since 2021, and as Bitcoin begins to pick up again with the ever growing interest from TradFi we’ll see the old pattern repeat itself with Altcoins booming and Bitcoin’s dominance dropping, giving way to another full blown Altcoin Season.
We see a new normal where Bitcoin rising only lifts up a few select set of boats at a time. So instead of ever having a full blown Altcoin Season again, we see this rotation of narratives and attention that we’ve seen so far. This means there’s essentially mini altcoin seasons everywhere but Bitcoin maintains dominance.
The 4-year cycle pattern breaks down as Bitcoin becomes almost an entirely separate asset from the rest of crypto since it’s being used as a financial hedge by TradFi. Altcoins end up forming new mechanisms that drive price growth that aren’t so strongly correlated to Bitcoin’s price.
Now, I have no idea what the future holds, but I don’t think Bitcoin’s 4-year cycle will break down and that Altcoins and Bitcoin will move in separate directions, at least not yet.
I do think though that we’ll more of point 2 than point 1, in other words we see less regular Altcoin Seasons where all ships are lifted, and in fact different narratives help different cryptos to rise at given moments of time.
If all of this has left you unsure about how to interepret the market then I suggest re-reading my portfolio management post from a couple of weeks ago so that you can withstand these rough moments and position yourself appropriately.
While we may never see a full blown Altcoin Season again, there’s no doubt this space is just going to grow from strength to strength.
I’m personally very optimistic about what’s to come!
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