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Altcoin Season: What, When, And Why

2022-04-20

Main Takeaways:

  • The term ‘altcoin season’ refers to a period where altcoins steadily outperform Bitcoin.

  • While there’s no such thing as guaranteed profits due to market volatility, altcoin season may be a good time for traders and investors to diversify their portfolios.

  • It’s also good to learn how to spot an altcoin season as it tends to affect Bitcoin dominance.

  • Find out why and when an altcoin season begins and how to buy altcoins on Binance.

What’s an altcoin season? How does it affect crypto investors and traders? Learn about altcoin season and how you can add altcoins to your portfolio on Binance.

The term ‘altcoin season’ isn’t just a fancy phrase used to impress your crypto friends; it’s also an important period for traders who are looking to capitalize on market opportunities. Find out how to spot an altcoin season and how you can add altcoins to your portfolio on Binance.

Binance is the world’s leading blockchain ecosystem and cryptocurrency platform. Offering an unmatched financial product suite with hundreds of altcoins, the platform is trusted by millions of investors and traders worldwide. Start diversifying your portfolio by registering for a Binance account today.

What Is an Altcoin Season?

Altcoin season refers to a period where non-bitcoin cryptocurrencies, known as altcoins, outperform BTC.

We all know that Bitcoin, the world’s largest cryptocurrency by market capitalization, or market cap, is widely traded across the globe. In fact, it commands such a significant portion of the trading volume in cryptocurrency markets that there is a well-known metric that compares BTC to non-BTC cryptocurrencies. This metric, aptly named ‘Bitcoin dominance’, is described as the ratio between the market cap of Bitcoin to the rest of the cryptocurrency markets.

While Bitcoin dominance used to be close to 100%, the presence and rising popularity of altcoins has led to a fall in the dominance of Bitcoin. When multiple altcoins gain significant market cap that overtakes Bitcoin’s market cap, it may signal the start of an altcoin season.

During an altcoin season, altcoins tend to outperform Bitcoin, causing Bitcoin to lose dominance in the crypto market. Because of this, seasoned traders and investors with diversified portfolios take note of altcoin seasons to adjust their portfolios accordingly. 

Why Does an Altcoin Season Happen?

While we cannot pinpoint the exact cause of an altcoin season, there are factors that contribute to it. Below are two potential factors that could lead to an altcoin season.

Moving funds from Bitcoin to other crypto

After a significant upward price movement, the price of Bitcoin will tend to become more stable. As a result, investors seeking more profitable investment opportunities might sell their bitcoin for altcoins eventually triggering an altcoin season. To learn more about market dynamics, you may read our explanation of the Wyckoff Method.

Changing trends like NFTs and DeFi that involve altcoins 

2020 was the year for DeFi. In 2021, it was NFTs. And presently, Web 3.0 is gaining popularity, along with Web 3.0 tokens. The blockchain space is constantly innovating and evolving – it’s precisely this never-ending evolution that has given rise to the current pool of altcoins with strong utility cases today. 

Thanks to the ever-evolving nature of the industry, some altcoins might get more attention than Bitcoin. When traders and investors trade with trends that feature certain altcoins, the market cap tends to increase. In time, this could cause an altcoin season.

3 Indicators to Spot an Upcoming Altcoin Season

Due to the volatile nature of cryptocurrency, there is no perfect indicator of an upcoming altcoin season. From historical data, however, there are some indicators that can possibly signal an altcoin season.

When Bitcoin is enjoying a bull market run

In the past years, Bitcoin’s bull market has often ended with altcoins performing well. This phenomenon can be attributed to new investors purchasing altcoins because they are more affordable than Bitcoin, thus making their growth potential more attractive.

When the prices of large market cap altcoins start to increase

Other than Bitcoin (BTC), there are other popular cryptocurrencies that have large market capitalizations as well. When altcoins like BNB and Ether (ETH) enjoy upward price movements that surpass that of Bitcoin, profits may sometimes flow to other altcoins as well. This is similar to the logic of investors moving funds from Bitcoin to other potentially profitable altcoin investments. 

When there are new blockchain trends

The power of blockchain trends has been a strong factor in the performance of specific altcoins. For example, during the peak of DeFi in 2020, DeFi altcoins started (and are still) experiencing growth. The metaverse trend is another trend that spurred the interest of gamers, fans, and other communities outside of the crypto world. Since altcoins are fundamental to accessing the metaverse, it is no wonder that their popularity rose when the metaverse took the world by storm. As new blockchain trends and milestones continue to emerge, the hype around altcoins involved in these trends will likely follow suit.

When is the perfect time to buy altcoins?

There is no right time to buy or sell altcoins. Due to the volatility of cryptocurrency markets, no one can perfectly time an altcoin season nor accurately predict how long it will last. 

Instead, you should always do your own research (DYOR) about the altcoins that you are interested in. It is important to understand their value within the crypto ecosystem and the risks that may accompany them. Other than fundamental analysis, traders that have a shorter time horizon for trading can also use different technical indicators to monitor altcoins’ price movements and patterns

How to buy altcoins on Binance

Interested in buying altcoins before altcoin season? You can do so on Binance within minutes. Binance offers a range of payment options for smooth and easy transactions. Here’s how you can buy altcoins and other crypto while enjoying lower fees on Binance in two simple steps:

Step 1: Make a fiat deposit via an e-wallet transfer or bank transfer on Binance. Make sure to check the available fiat channels for desired currencies. For more information, see our in-depth guide on How to Deposit USD via SWIFT.

Optional: Convert the fiat currencies to BUSD or USDT so that you can trade a greater variety of tokens.

Step 2: Purchase your preferred altcoins through a user wallet purchase or directly with a credit/debit card.

Conclusion

For investors and traders looking to diversify their portfolios, altcoins are a good alternative to Bitcoin. Armed with the knowledge of altcoin season, you can DYOR more thoroughly before investing in an altcoin of your preference. Register for a Binance account to buy your first altcoin today.

Ready to start your crypto journey with Binance?

Sign up for a Binance accountor download the Binance crypto trading app. Next, verify your account today. Once your account is verified, there are three main ways to buy cryptocurrencies on Binance using fiat: you can buy crypto with fiat from Binance via bank transfer, card channels, or e-wallets options.

Buy BUSD, BNB and cryptocurrencies with a Debit Card, Credit Card, or via Bank Transfer.

Linking your debit card, credit card, or bank account (available in many regions) is one of the easiest ways to buy Bitcoin and more than 200+ cryptocurrencies.  

The article was edited on July 27, 2022.

Disclaimer: Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made in this blog should not be considered financial advice and are not intended to serve as an investment recommendation. 

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