What Is Altcoin Season, and How to Trade Altcoins?

Altcoin season is a crypto market phase where altcoins, or non-Bitcoin cryptos, a surge in value, often surpassing Bitcoin's performance. Factors like heightened investor interest in altcoins, unique altcoin project developments, or overall bullish market sentiment can trigger this growth.

Like any other financial space, the cryptocurrency market experiences periods of heightened activity and market cycles. Among these, the phenomenon known as altcoin season stands out, especially intriguing for those invested in the wide array of Bitcoin alternatives.

As of March 2024, the crypto world is alive with anticipation. Bitcoin hovers around the $64,000 mark, while the total market capitalization breaches the $2 trillion threshold. The optimism is largely fueled by the impending Bitcoin halving, securing Bitcoin's dominance at 52.94%. Yet, amidst this, altcoin season beckons—a time when altcoins surpass Bitcoin in terms of price appreciation, signaling a crucial juncture for market participants.

Altcoin season, a period when altcoins outperform Bitcoin in terms of price gains, is a pivotal phase in the cryptocurrency market. Understanding what this means and how to navigate it can be crucial for informed decision-making.

Altcoin season refers to a period when the aggregate market capitalization of all altcoins (cryptocurrencies other than Bitcoin) outperforms Bitcoin itself during a bull run in the crypto market. This surge in price and trading volume for altcoins draws more investor attention, occurring when confidence in the crypto market extends beyond Bitcoin, fostering investments in emerging cryptocurrencies. This trend typically occurs when the surging investor confidence spreads beyond Bitcoin, increasing investments in other cryptocurrencies when Bitcoin becomes unaffordable for retail investors.

Altcoin Season vs. Bitcoin Season

During an Altcoin Season, the broader market's focus shifts away from Bitcoin to alternative cryptocurrencies. This shift is characterized by a substantial increase in both the prices and trading volumes of altcoins. Several factors drive this surge, including speculative trading, new project launches, technological advancements, and increasing utility that captures investor interest. The result is often a period where many altcoins experience rapid price appreciation, frequently outperforming Bitcoin. The capital will flow into altcoins after a sustained period of price increases in Bitcoin and become unaffordable for average investors.

Conversely, Bitcoin Season is marked by the market's heightened focus on Bitcoin, often at the expense of altcoins. During these periods, Bitcoin's dominance index—a measure of Bitcoin's market capitalization relative to the total crypto market cap—increases, indicating investors are favoring Bitcoin over altcoins. Reasons for this shift include Bitcoin's perceived stability, its status as digital gold, or a flight to safety amidst broader market uncertainty. In bear markets, where pessimism prevails, investors often gravitate towards Bitcoin or stablecoins, seeking lower risk. In this phase, altcoins may stagnate or even lose value as investment will concentrate on Bitcoin or large coins.

Past altcoin seasons when Bitcoin dominance dipped under 50% | Source: TradingView

Historical examples of altcoin seasons include periods following major technological advancements or significant crypto market milestones.

Late 2017 - Early 2018

During this altcoin season cycle, the Bitcoin dominance started the year at 87% and plummeted to an all-time low of 32% during the altcoin bubble peak in January 2018. On the other hand, altcoins’ dominance rose significantly as Bitcoin's dominance fell, indicating a massive surge in altcoin valuations.

The total cryptocurrency market cap saw explosive growth from around $30 billion in early 2017 to over $600 billion around a year later, with many altcoins achieving all-time highs. This period was marked by the ICO boom, where numerous new tokens were launched, attracting significant investment and speculative interest.

Early 2021

The Bitcoin dominance began the year with dominance falling from 70% to 38%, showing a significant shift towards altcoins. Meanwhile, altcoins' market share rose from 30% to 62%, more than doubling in the span of a year. This period was characterized by a massive boom in DeFi projects, NFTs, and even memecoins. Altcoins related to these sectors, including smaller-cap cryptocurrencies, saw tremendous gains.

Some of the best-performing altcoins during this cycle included Solana, Polygon, Dogecoin, Shiba Inu, PancakeSwap, and BNB. The total cryptocurrency market cap surged past $2 trillion for the first time, led mostly by altcoins. This period, which was the largest bull run in the crypto market to date, saw Bitcoin price cross $69,000 while the total crypto market cap soared to an ATH of over $3 trillion by the end of 2021.

Both periods highlight the cyclical nature of "altcoin seasons," where interest and capital shift from Bitcoin to a broader range of altcoins, driven by various factors such as technological advancements, market trends, and speculative interest. The crypto market has grown in complexity since 2017, with over 10,000 altcoins by 2021 and a notable presence of stablecoins in the market cap rankings. This diversification indicates a broadening of the market and investment strategies, with capital flowing into a variety of niches within the cryptocurrency space.

Q4 2023-?

The current bullish mood in the crypto market is mainly powered by the optimism surrounding the upcoming Bitcoin halving in April 2024 and potential spot Ethereum ETF approvals by the US SEC by May 2024. However, unlike the previous altcoin seasons that were driven by ICOs, DeFi, and NFTs, the upcoming altcoin season could see rallies in more sectors of the market, such as AI, GameFi, metaverse, DePIN, and web3. The market has already experienced strong rallies in some altcoins, such as Arweave, JasmyCoin, dogwifhat, Worldcoin, and Fetch.ai.

In 2023, artificial intelligence (AI) became a leading narrative within the crypto market, driven by advancements in technology and the integration of AI into various platforms. Notable performers in the AI sector included Akash Network and Render, with price surges of 1,170% and over 1,000%, respectively. The total AI coins’ market cap is above $20 billion at the time of writing.

Here’s a list of the top AI coins to trade in the crypto market.

The GameFi sector also made a strong comeback, with companies entering the blockchain gaming arena and projects like ImmutableX and Ronin experiencing significant price increases of nearly 480% and 580%. The GameFi sector enjoys a market cap of over $25 billion at the time of writing.

Take a look at the top GameFi projects to invest in.

Memecoins, while initially considered as novelty or joke cryptocurrencies, have evolved to include more functionalities and technological integrations, such as AI. This evolution is exemplified by projects like SnailBrook, which aims to unite all memecoins into a single ecosystem and has integrated AI technology to enhance efficiency and create a future-proof memecoin ecosystem. Memecoins enjoy a total market cap of just under $50 billion at the time of writing.

Check out the best memecoins to buy this bull market cycle.

The expansion of memecoins beyond the Ethereum ecosystem is another noteworthy trend, with Solana-based memecoins gaining popularity. The Solana ecosystem, in particular, has seen a 945% increase in its token price, recovering from its "dead-chain" label and contributing to the broader acceptance and growth of memecoins in various blockchain environments.

Bitcoin vs. altcoin market cap | Source: K33 Research

While there's no foolproof way to predict an altcoin season, there are key indicators that can suggest its potential arrival:

Rising altcoin dominance: This metric measures the market cap of all altcoins compared to Bitcoin's market cap. When this metric increases significantly, it suggests investors are shifting their focus toward altcoins.
Bitcoin Dominance Index: A decrease in Bitcoin's market dominance below 50% often signals the start of altcoin season.
Increased trading volume in altcoins: A noticeable increase in trading volume across various altcoins can indicate growing interest and potential price hikes. According to K33 Research, recent gains by at least 40% of meme coins like DOGE, SHIB, BONK, PEPE, and WIF suggest a potential altcoin season coming up in 2024.
Positive overall market sentiment: Bullish market sentiment across the cryptocurrency space can often spill over to altcoins, increasing prices. According to Swissblock analysts, ETH breaking above $3,500 could signal the onset of altcoins outperforming bitcoin in the current bull market cycle.
Specific events: Events like launching a promising altcoin project or regulatory developments favoring altcoins can trigger an altcoin season.

KuCoin is widely recognized as one of the leading altcoin exchanges globally, offering more than 800 cryptocurrencies to buy, sell, or trade on our platform. Its comprehensive selection, user-friendly interface, and advanced security features make it a top choice for traders looking to diversify their crypto portfolio with altcoins. Moreover, projects listed on KuCoin are strictly vetted by our stringent security and regulatory standards.

Here's a straightforward guide on how to buy altcoins on KuCoin:

Create an Account: The first step is to sign up for a KuCoin account. Visit the KuCoin website and click on the "Sign Up" button. You'll need to provide an email address or phone number and set a password. Complete the KYC verification process as required.
Secure Your Account: It's highly recommended to enable two-factor authentication (2FA) for an added layer of security. This can usually be set up in the account settings section.
Deposit Funds: Before buying altcoins, you need to deposit funds into your account. KuCoin allows deposits in both cryptocurrencies and fiat currencies. If you're depositing crypto, navigate to the "Assets" section, select "Deposit," and choose the cryptocurrency you wish to deposit to get the address. KuCoin supports fiat deposits via credit/debit cards and bank transfers. Availability may vary by region.
You can also fund your account by buying crypto on the KuCoin P2P marketplace or transferring existing crypto holdings from your wallet to your KuCoin funding account.
Search for Altcoins: Once your account is funded, go to the "Markets" or "Trade" section to find the altcoin you want to buy. You can use the search bar to find the specific cryptocurrency by its ticker symbol or name.
Place an Order: After selecting the altcoin, decide on the type of order you want to place on the KuCoin Spot Market. KuCoin supports various order types, including market orders (buy immediately at the current market price) and limit orders (set a specific price at which you want to buy). Enter the amount of the altcoin you want to purchase and confirm your order. You can also use other products like KuCoin’s Pre-Market, Margin Trading, or Futures Trading to buy leading altcoins, or automate your trades with KuCoin trading bots.
Manage Your Altcoins: After the purchase, your altcoins will be credited to your KuCoin account. You can view your holdings in the "Assets" section. From here, you can choose to keep your altcoins on KuCoin, trade them for other cryptocurrencies, or withdraw them to an external wallet. You can also earn passive income on some altcoins via KuCoin Earn.

Given the volatile nature of the cryptocurrency market, it's important to do your own research and consider your investment strategy carefully before buying altcoins or any other digital assets. KuCoin, with its extensive range of altcoins and robust trading features, offers a dynamic platform for exploring the cryptocurrency market.

Do your research: Before investing in any altcoin, thoroughly research the project, its team, technology, and market potential. Don't get caught up in the hype without understanding the underlying fundamentals.
Diversify your portfolio: Don't put all your eggs in one basket. Spread your investments across various promising altcoins to mitigate risk.
Set realistic expectations: While altcoin season can be lucrative, don't expect overnight riches. Remember, the market can be volatile, and prices can fluctuate rapidly.
Manage your risk: Always implement proper risk management strategies, such as setting stop-loss orders and maintaining a healthy balance between potential rewards and acceptable losses.

While altcoin season can be an exciting opportunity, it also comes with inherent risks:

Increased volatility: Altcoin prices tend to be more volatile than Bitcoin, leading to the potential for significant losses in a short time span. Additionally, users may incur higher costs from price spreads in an illiquid altcoin market
Hype and speculation: Excessive hype and speculation can artificially inflate prices, leading to potential price bubbles and crashes.
Scams and rug pulls: Be wary of scams and rug pulls, where developers abandon a project after raising funds from investors. Beware of pump-and-dump schemes that artificially inflate prices.
Regulatory Changes: Stay informed on regulatory developments that could impact altcoin markets.

Impact of Regulatory Changes on Altcoin Season

Regulatory changes have a complex impact on altcoin seasons, potentially catalyzing or dampening the enthusiasm around altcoins. Notable regulatory developments that have influenced altcoin seasons include announcements of increased scrutiny or regulation of cryptocurrencies by major economies, which can lead to market uncertainty and impact investor sentiment. For example, announcements of regulatory crackdowns on ICOs back in late 2018 or stricter guidelines for cryptocurrency exchanges in various countries have historically led to increased volatility and sometimes a dampening of altcoin season fervor.

Conversely, positive regulatory clarity or the adoption of favorable regulations for cryptocurrencies can stimulate interest in altcoins. An example is when jurisdictions provide clear legal frameworks for crypto assets or when significant regulatory bodies express openness to blockchain innovations, encouraging investment in altcoins. A perfect instance of this is the recent approval of spot Bitcoin ETFs by the US SEC, encouraging institutional investors to enter the crypto market and boosting the overall market sentiment These regulatory changes underscore the importance of staying informed on global regulatory developments, as they can significantly affect the dynamics of altcoin seasons.

Altcoin season offers a window of opportunity for savvy investors willing to navigate its challenges. By staying informed, diversifying investments, and practicing sound risk management, traders can potentially maximize their profits during this period. Drawing on the educational ethos of platforms like Binance Academy, investors are encouraged to deepen their understanding of the market dynamics at play.