In the final stages of each cycle, so far altcoins have provided the highest returns. This is due to the fact that after a period of huge increases in Bitcoin, capital begins to flow into altcoins. The current 4-year cycle is expected to end in a little over a month. Therefore, if the current cycle ends like the previous ones, we can expect another altcoin season. Thus, in this article, I will focus on 5 tips that may help you enter this market.
1. Monitor Bitcoin dominance and determine entry timing
BTC dominance is the percentage of total cryptocurrency market capitalization attributable to Bitcoin. It serves as a key indicator for determining the right moment to enter altcoins.
Key Bitcoin dominance levels to watch:
64%: It was at these levels that huge volumes appeared, after which dominance began to decline.
60%: Psychological barrier
54%: The low of the last mini altcoin season. A drop below this level may suggest the beginning of a bullish trend for altcoins.
45-50%: Advanced altcoin season.
Thus, another important point on the chart may be the level of 54%. At that point, altcoins, especially the top hundred with the largest market capitalization, tend to rise more than Bitcoin.
An interesting fact is that in the previous cycle, BTC dominance rose for 155 weeks and then started to decline, marking the beginning of altcoin season. In this cycle, at the end of August, we are just passing the 155th week of rising BTC dominance. Thus, we are currently at a very critical moment.
Using the ETH/BTC chart
The ETH/BTC pair serves as a barometer for capital rotation between Bitcoin and altcoins. The rise of $ETH against $BTC often precedes a broader move towards altcoins. In April of this year, there was a low and since then ETH has been rising faster than BTC. So far, we have been experiencing a multi-month trend that is getting stronger.
2. Sector rotation - identify trends
Understanding the altcoin rotation cycle
The altcoin season unfolds in predictable phases:
Early phase: Bitcoin leads, the best strategy is to hold BTC
Second phase: Capital transitions to Ethereum and large altcoins (BNB, SOL, ADA)
Third phase: Broad rise of the largest altcoins
Final phase: Euphoria around small projects and memecoins
Current trends that may be strong this year
Layer 2 - all layer two projects can gain significantly if Ethereum is in a strong uptrend. Generally, projects related to $ETH will be closely monitored by the market.
DeFi - considering how the stablecoin market will develop, the DeFi trend may be very strong this year. This is because stablecoins are a central element of the DeFi niche.
AI tokens - The principle is simple. The faster the AI industry develops, the better AI-related tokens can perform.
RWA - Asset tokenization is accelerating at an exponential rate. This is a trend for the next few years ahead. Consequently, projects related to this trend may enjoy considerable interest.
Memecoins - The final stage of the alt season ends with a true mania, where totally worthless projects enjoy strong increases. In the previous cycle, these were memecoins, and this year may be similar.
Sector rotation strategy
Effective rotation requires monitoring several indicators:
Trading volume in individual sectors (Look for very large volumes, they usually indicate where capital is flowing)
Capital inflow into DeFi protocols (Total Value Locked)
Developer activity
Social media sentiment
3. Use technical analysis for entry and exit timing
Momentum indicators for altcoins
Combining RSI and MACD allows for an insight into altcoin momentum:
RSI (Relative Strength Index):
Above 70: Overbought, potential sell signal
Below 30: Oversold, potential buy signal
Around 50: Neutral zone, crossing upward signals increasing momentum
MACD (Moving Average Convergence Divergence):
MACD line crossing above the signal line: Bullish signal
Crossing below: Bearish signal
Histogram: Shows trend strength
Practical strategy:
Look for RSI below 30 (oversold)
Confirm with bullish MACD crossover
Check volume increase
Stop-loss 15% below entry
Target: RSI 70 or resistance level
4. Position management and diversification
Altcoins are characterized by significantly higher volatility than Bitcoin, making proper position size management essential:
Single position: Max 5-10% of the portfolio on one altcoin
Stage entry (DCA): Build positions in 20-30% tranches
Sector diversification: Spread investments among 3-5 different sectors
Allocation model for a bull market:
40%: Large altcoins (ETH, SOL, ADA)
30%: Medium altcoins with specific solutions
10%: Small high-risk/high-potential projects
20%: Stablecoins for liquidity (holding stablecoins allows you to buy tokens during corrections)
5. Set clear goals and exit strategies
Take-profit and stop-loss systems
Proper risk management is the foundation of success in altcoin trading:
Take-profit (realizing profits):
Set goals at technical resistance levels
Partially sell upon reaching 50%, 100%, 200% profit
Use trailing stop-loss to secure profits
Stop-loss (limiting losses):
Set 15% below the entry level for large altcoins
30% for small high-volatility projects
Place just below key support levels
Preparation of exit strategy
Establish an exit plan in advance:
Portfolio goal: Exit the market after reaching a certain value
Signals of the end of a bull market: Extreme greed (Fear & Greed Index >90)
Conversion to stablecoins: Protect profits in USDC
Indicators of the end of alt season
Watch for warning signals:
Extreme levels on the Fear & Greed Index
Massive retail investor entries (FOMO)
Unrealistic price predictions in the media
Increase in funding rates on futures exchanges
Psychology and discipline
The altcoin season tests the investor's psyche. Key rules:
Stick to the previously established plan
Avoid increasing positions under emotional influence
Reduce the frequency of transactions during high emotionality
Summary
Trading altcoins during a bull market offers high potential profits but requires a systematic approach and discipline. The key is to monitor Bitcoin dominance, identify sector rotations, use technical analysis, manage positions properly, and have clear exit strategies. Remember, no profits are guaranteed - invest only funds you can afford to lose and continually expand your market knowledge.
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