Altseason: What You Need to Know About Alternative Cryptocurrency Dominance Periods

The cryptocurrency market is cyclical, and each cycle brings periods when investor attention shifts away from the leading asset. Altcoin season is precisely such a period when alternative cryptocurrencies begin to show pronounced growth, often surpassing Bitcoin. Understanding the mechanics of these periods becomes critically important for market participants, especially considering changes in capital flow dynamics and the influence of institutional investors.

As of December 2024, the cryptocurrency sphere is on the verge of significant changes. Possible regulatory shifts in major economies, especially after recent political events, create conditions for a potential expansion of the altcoin market. This was preceded by Bitcoin’s fourth halving and the approval of spot ETFs for key cryptocurrencies, which contributed to attracting various categories of investors to the market.

Main Characteristics of Altcoin Season

Altcoin season is a period when the total market capitalization of altcoins exceeds that of Bitcoin in a rising market. However, modern altcoin seasons differ from previous cycles.

Whereas earlier altcoin seasons resulted from capital rotation directly from Bitcoin into alternative assets, the current situation is different. The key driver now is the increase in trading volumes of altcoins against stablecoins — USDT, USDC, and others. This indicates a more organic market growth supported by a genuine influx of liquidity rather than speculative fund transfers.

According to analysis by leading crypto market researchers, the availability of stablecoins plays a decisive role in creating conditions for expanded altcoin trading. Thanks to increased liquidity in USDT and USDC pairs, investors can enter and exit positions more freely, stimulating activity.

Differences Between Altcoin and Bitcoin Dominance Periods

During altcoin season, investment interest shifts toward alternative assets. This phase is characterized by simultaneous price increases and trading volume growth of altcoins, often significantly outpacing the main asset.

Factors contributing to this shift are diverse: speculative sentiment, launch of innovative projects, technological breakthroughs, and increasing utility of solutions. As a result, many altcoins demonstrate parabolic growth, often leaving Bitcoin’s dynamics behind.

An interesting pattern: capital begins to flow into alternative assets after Bitcoin’s price has been rising for a long time and becomes psychologically less accessible to the average investor.

In contrast, Bitcoin dominance season is characterized by concentrated interest in the main asset, often at the expense of altcoins. During such periods, Bitcoin’s dominance — its market capitalization relative to the total crypto market cap — increases. These cycles often coincide with periods of market uncertainty, when investors prefer safety and stability.

In bear markets, when pessimism prevails, capital is usually concentrated around Bitcoin or stablecoins. During this time, altcoins may stagnate or even lose value.

Evolution of Altcoin Season Mechanisms

Transition from Capital Rotation to Liquidity Role

In earlier stages of the crypto market development, altcoin seasons formed through the transfer of funds from Bitcoin into alternative assets. When the main asset was in consolidation, traders actively moved resources seeking higher potential returns. This dynamic drove the ICO wave in 2017 and the DeFi summer in 2020.

However, the paradigm has significantly changed. Experts note that trading volume between altcoins and stablecoins now plays a more important role than simple asset rotation. This indicates an evolution toward a more mature and naturally growing market, driven not by speculation but by increasing demand.

Enhanced liquidity in USDT, USDC, and other stablecoin pairs has paved the way for broader use of alternative assets, turning stablecoins into the foundation of modern trading ecosystems.

Role of Ethereum and Institutional Capital

Ethereum traditionally acts as the locomotive of altcoin seasons thanks to its developed ecosystem of decentralized finance, non-fungible tokens, and other innovations. Growing institutional investor interest helps strengthen Ethereum’s position and related platforms.

Analysts expect that the momentum from the second-largest cryptocurrency will continue to influence altcoin performance, especially amid diversification of corporate investor portfolios. Projects like Solana also attract attention due to their technical features and increasing adoption.

Bitcoin Dominance as an Indicator

Historically, a sharp decline in Bitcoin dominance below 50% has been a reliable signal of the start of an altcoin season. Current market conditions suggest that consolidation of the main asset at around $91,000–$100,000 could create a favorable environment for liquidity inflows into alternative assets and their ecosystems.

Altcoin Season Index

Specialized metrics developed by analytical services allow tracking the performance of the top 50 altcoins relative to Bitcoin. An index above 75 points is considered a signal of an active altcoin season. As of December 2024, this indicator has risen to 78, indicating that most altcoins are currently outperforming the main asset.

Regulatory Framework Significance

Legislative changes and regulatory clarifications significantly impact altcoin season volatility. Approval of spot instruments for Bitcoin strengthened market confidence and attracted corporate participants. A favorable regulatory environment in the near future could stimulate further growth of interest in alternative assets, especially if large asset managers consider creating instruments tracking other cryptocurrencies.

Historical Examples of Altcoin Seasons

2017-2018: The ICO Era

During late 2017 and early 2018, Bitcoin’s dominance dropped from 87% to 32%. This period coincided with the ICO boom, when a wave of new projects attracted massive speculative investments. The total crypto market cap grew from $30 billion to over $600 billion, with many altcoins reaching all-time highs.

However, this altcoin season ended abruptly. Regulatory restrictions and widespread investor disillusionment with many projects led to a crash in 2018.

Early 2021: DeFi and NFT Expansion

The beginning of 2021 brought a new altcoin season. Bitcoin’s dominance decreased from 70% to 38%, while the share of altcoins increased from 30% to 62%. This period was marked by explosive growth in decentralized finance, non-fungible tokens, and even meme coins.

Peripheral cryptocurrencies showed colossal gains. The total market capitalization reached an unprecedented $3 trillion by year’s end, driven by technological innovations and increasing retail participation.

Second half of 2023 — mid-2024: Multifaceted Growth

The bullish sentiment of this period was fueled by expectations of the main asset’s halving and potential approval of spot instruments for the second-largest cryptocurrency. Unlike previous waves, this cycle is characterized by a variety of sectors experiencing growth.

Sectors attracting capital:

1. AI-related cryptocurrencies: Integration of AI solutions into blockchain projects has generated enormous interest. Projects like Render and Akash Network demonstrated four-digit gains, fueled by rising demand for AI-powered solutions in the crypto industry.

2. Gaming platforms: The blockchain gaming sector revived with projects offering real value to gamers and investors. These platforms show sustained positive dynamics.

3. Meme coins: Starting as joke tokens, meme coins have evolved by integrating functionality. The growing diversity of such assets across various blockchain platforms indicates that this segment has become an independent category with its own audience.

Notably, meme coins expanded beyond a single ecosystem. Platforms based on alternative blockchains, especially fast and low-cost ones, showed meme coin growth of 945%, recovering from the label of being unpromising.

Last quarter of 2024 and beyond: Institutional Maturity

The current stage is characterized by several key processes:

1. Corporate participation: Approval of spot instruments for the main asset earlier this year accelerated the influx of funds from corporate investors. Over 70 such instruments have received regulatory approval.

2. Regulatory changes: Political shifts in major economies and growing legislative support create potential for a favorable regulatory environment.

3. New capitalization records: The total crypto market cap exceeded $3.2 trillion, surpassing the 2021 peak.

4. Psychological levels: The main asset approaches the $100,000 level, generating a wave of optimism among market participants.

Four Phases of Capital Flow in Altcoin Season

Stage 1: Main Asset Dominance

In the first stage, capital concentrates around Bitcoin as a safe haven. The dominance indicator rises, trading volumes of the main asset increase, and altcoins remain stagnant.

Stage 2: Activation of the Second Largest Cryptocurrency

In the second stage, liquidity begins shifting to Ethereum. Investors explore decentralized finance opportunities and layer-2 solutions. The Ethereum-to-Bitcoin ratio increases, and activity in DeFi ecosystems intensifies.

Stage 3: Growth of Mid-Sized Altcoins

The third stage sees a rally of larger altcoins with established ecosystems. Projects like Solana and Cardano demonstrate double-digit gains.

Stage 4: Blooming Peripheral Assets

In the fourth stage, capital flows into low-cap altcoins and speculative projects. Bitcoin’s dominance drops below 40%, and smaller altcoins show parabolic growth.

Signs of an Approaching Altcoin Season

You can identify the start of an altcoin dominance period by several markers:

1. Decrease in Bitcoin dominance: Falling below 50% typically signals increased activity in alternative assets.

2. Ethereum/Bitcoin ratio dynamics: Rising values indicate the second asset’s outperformance, often preceding broader rallies.

3. Specialized indices: Metrics tracking the top 50 altcoins relative to Bitcoin, with values above 75 points, indicate an active altcoin season.

4. Expansion of trading volumes: Increased activity in altcoin-stablecoin pairs, especially in promising sectors, signals growing confidence.

5. Social media waves: Discussions, memes, and comments from influential figures often reflect retail interest in alternative assets.

6. Market psychology: Transition from pessimism to optimism usually coincides with the start of altcoin season.

7. Stablecoin liquidity: Growing liquidity in pairs with stable currencies facilitates participation in altcoin trading.

General Scheme for Buying Altcoins

To participate in altcoin trading, follow these basic steps:

1. Register on a platform: Choose a reliable exchange and complete identity verification.

2. Secure your account: Enable two-factor authentication for added security.

3. Fund your account: Deposit funds in cryptocurrency or fiat. Most platforms offer multiple deposit options: cards, bank transfers, P2P markets.

4. Find the desired asset: Use the search function to locate the cryptocurrency of interest.

5. Place an order: Choose order type — market for immediate purchase or limit to buy at a specific price. Enter amount and confirm.

6. Manage assets: After purchase, monitor your portfolio, consider earning passive income through specialized programs, or withdraw assets to your own wallet.

Strategies for Successful Trading During Altcoin Season

• In-depth research: Before investing, study the project, its team, technology, and potential. Avoid hype without understanding fundamentals.

• Capital allocation: Diversify investments across several promising altcoins and sectors to reduce risk.

• Realistic expectations: Remember, altcoin season is volatile. Don’t expect instant riches; prepare for price fluctuations.

• Risk management: Use proven techniques — setting stop-loss orders, maintaining a healthy balance between potential gains and acceptable losses.

• Profit-taking: Regularly withdraw part of your earnings to protect accumulated funds from sudden corrections.

Risks of Trading Altcoins

Don’t forget the inherent risks during altcoin seasons:

• Increased volatility: Altcoins are generally more volatile than the main asset. Illiquid markets can have wide bid-ask spreads.

• Speculative bubbles: Excessive enthusiasm can artificially inflate prices, creating conditions for crashes.

• Fraud schemes: Beware of projects where developers abandon work after raising funds or schemes of artificial price inflation.

• Regulatory risks: Legal restrictions can sharply change the dynamics of the altcoin market.

Impact of Regulatory Changes on Altcoin Seasons

Regulatory policy shifts have a dual impact on altcoin seasons. Unfavorable actions can cause uncertainty and reduce interest, as seen after ICO restrictions in 2018.

Conversely, positive signals — such as clear legal frameworks or approval of new instruments — can catalyze capital inflows. The approval of spot instruments for Bitcoin by the US regulator is an example of such positive signals.

Conclusion

Altcoin season is a multifaceted period requiring market participants to be attentive, disciplined, and strategic. Staying informed about market trends, practicing diversification, and managing risks can help traders maximize opportunities during this time. The key to success is balancing ambition with caution, profit desire with understanding potential losses.

Continuous learning and adapting to the evolving market dynamics remain fundamental to successful participation in cryptocurrency trading.