How to seize Altseason? Trading opportunities and risk defenses during the altcoin season

Cryptocurrency markets are similar to stock markets, with cyclical hot spots rotating. Among the most watched phenomena is altseason, which is the period when cryptocurrencies other than Bitcoin collectively rise.

What is Altseason? Essential Market Phenomenon for Traders

Altseason refers to a period when the performance of altcoins (alternative coins) collectively surpasses Bitcoin. Simply put: when a large amount of capital flows from Bitcoin into other coins, the prices and trading volumes of altcoins experience explosive growth.

Unlike in the past, today’s altseason is no longer just about funds shifting from BTC to altcoins. According to CryptoQuant CEO Ki Young Ju, stablecoin liquidity and institutional capital inflows have become new driving forces. Previously, traders moved to altcoins during Bitcoin consolidation to seek profits; now, abundant liquidity in stablecoins like USDT and USDC makes the altcoin market healthier and deeper.

Altseason vs BTC Season: Two Sides of Capital Rotation

Altseason Period:

• Market attention shifts from Bitcoin to mainstream coins like Ethereum and Solana
• Small-cap coins begin to surge
• Bitcoin Dominance index (Bitcoin’s market share) declines noticeably
• Trading enthusiasm surges, transaction volumes spike

BTC Season Period:

• Investors prefer Bitcoin’s stability
• Bitcoin Dominance index rises
• Altcoins are in a doldrums
• Risk aversion dominates

In short, these two seasons represent a switch in market risk appetite—altseason is aggressive, BTC season is conservative.

Evolution of Altseason: From Capital Rotation to Ecosystem Prosperity

In recent cycles, altseason has undergone fundamental changes.

2017-2018: ICO (Initial Coin Offering) Boom

• Bitcoin Dominance index dropped from 87% to 32%
• New coins like Ethereum, Ripple, Litecoin exploded
• Market cap surged from $30 billion to over $60 billion
• But regulatory crackdowns abruptly ended the boom

Early 2021: DeFi and NFT Wave

• Bitcoin Dominance index fell from 70% to 38%
• Decentralized finance and non-fungible tokens became hot topics
• Total market cap hit $3 trillion
• Small-cap coins saw the most exaggerated gains

End of 2023 - Mid 2024: Multi-sector Boom

• Not just DeFi and NFTs, but AI tokens, GameFi, Web3, and more sectors advance simultaneously
• AI concept coins like Render(RNDR) and Akash(AKT) surged over 1000%
• Solana ecosystem recovers, memecoins based on SOL explode
• Rotation from single-track to comprehensive ecosystem development

Key Change: From speculative rotation to ecosystem application implementation

Why Focus on Altseason Now? Market Signals at the End of 2024

As of December 2024, several indicators suggest a new round of altseason is forming:

1. Bitcoin Dominance Index Weakening

• Historical data shows that when the index drops below 50%, it’s a strong signal for altseason
• When BTC price consolidates, funds seek new growth points

2. Stablecoin Liquidity Abundant

• USDT and USDC trading pairs deepen
• This means lower costs and higher efficiency for investors entering and exiting altcoin markets

3. Institutional Capital Continues to Flow In

• Over 70 related products approved after Bitcoin spot ETF approval
• Institutional diversification supports the altcoin market

4. Policy Environment Improves

• The US political climate becomes more friendly toward cryptocurrencies
• Clear regulatory frameworks help eliminate market uncertainty

5. Altseason Index Reaches 78

• An index from Blockchain Center above 75 indicates entering altseason territory
• Top 50 altcoins generally outperform Bitcoin

Four-Stage Liquidity Model of Altseason

To truly grasp the opportunities of altseason, it’s essential to understand how capital gradually flows in:

Stage 1: Bitcoin Accumulation Phase

• Funds flow into Bitcoin, Bitcoin Dominance rises
• Altcoin prices stagnate or decline
• Performance: BTC trading volume surges, altcoins remain quiet

Stage 2: Ethereum Awakening Phase

• Funds shift from BTC to ETH
• DeFi projects and Layer-2 solutions become active
• Performance: ETH/BTC ratio rises, DeFi ecosystem trading heats up

Stage 3: Mainstream Coins Explode

• Solana, Cardano, Polygon enter growth channels
• Second-tier coins start to rise together
• Performance: mainstream coins gain double digits

Stage 4: Full Altseason

• Small-cap coins surge, memecoins flood the market
• Bitcoin Dominance index drops below 40%
• Performance: highest participation, highest risk

How to Identify the Start of Altseason?

Indicator 1: Bitcoin Dominance Index

• Rapid decline is a key signal
• Historically, dropping below 50% always coincides with altseason initiation

Indicator 2: ETH/BTC Ratio

• Reflects Ethereum’s relative strength against Bitcoin
• Rising ratio = good times for altcoins

Indicator 3: Altseason Index

• An official index over 75 indicates altcoins are surpassing BTC
• Real-time data is quite reliable

Indicator 4: Trading Volume Changes

• Focus on transaction volume of alt/stablecoin pairs
• Increasing volume often leads price movements

Indicator 5: Social Media Buzz

• Discussions about certain coins on Twitter/X
• Hot topics on Reddit and other platforms
• Be cautious of false hype

Indicator 6: Stablecoin Inflows

• USDT, USDC flowing into exchanges
• Indicates large funds are preparing to enter

How to Trade During Altseason? Practical Strategies

Step 1: Coin Selection Logic

Not all altcoins are worth buying. Selection criteria:

• Ecosystem: Does the project have real applications and developer community?
• Team: Background and track record of core members
• Technology: Is there innovation in the underlying logic?
• Market Cap: Very small coins have high liquidity risk; large coins have limited upside

Popular sectors: AI, GameFi, DePIN, Web3 infrastructure

Step 2: Diversified Allocation

• 60% in mainstream coins (BTC, ETH, SOL)
• 30% in potential mid-tier coins (emerging public chains or sector leaders)
• 10% in high-risk, high-reward coins (small-cap innovative projects)

Avoid putting all your eggs in one basket.

Step 3: Set Goals and Stop-Loss

• List target prices for each coin
• Sell in batches upon reaching targets, not all at once
• Set stop-loss lines (e.g., -20%) to prevent small losses from turning big
• Locking profits is the most important habit

Step 4: Continuous Adjustment

• Monitor fundamental changes
• Track key indicators (trading volume, holder addresses, etc.)
• Adjust positions immediately if risk signals appear

Two Major Risks of Altseason

Risk 1: Extreme Volatility

• Altcoins are far more volatile than Bitcoin, prone to:
  • Rapid surges followed by crashes
  • Slippage due to liquidity shortages
  • Smaller coins are more easily manipulated

Mitigation:

• Keep position sizes small
• Avoid high leverage
• Choose coins with sufficient liquidity

Risk 2: Fraud and “Pulling the Plug”

Some projects run away after raising funds. Common tactics:

• Rug pull (project team absconds with funds)
• Pump and dump (artificial hype then dump)
• False publicity and partnerships

Mitigation:

• Verify project information
• Be wary of overpromising promotions
• Don’t chase high prices
• Follow community discussions

Risk 3: Regulatory Changes

Some countries suddenly implement policies that impact the market, e.g.:

• 2018 ICO bans
• Exchange shutdowns
• Large transfer restrictions

Mitigation:

• Follow policy developments in key jurisdictions
• Avoid overconcentration in jurisdictions with high regulatory risk
• Understand whether projects have compliance risks

How Do Policies and Regulations Affect Altseason?

Regulation impacts are twofold:

Negative Effects:

• Strict regulation → market panic → capital withdrawal
• 2018 ICO bans → immediate cooling of altseason

Positive Effects:

• Clear legal frameworks → increased investor confidence
• Approval of Bitcoin spot ETFs → market sentiment improves
• Potential XRP spot ETF → specific coins benefit

Conclusion: High transparency in regulation is actually beneficial for long-term altseason.

Summary: Three Keys to Catching Altseason

1. Monitor Core Indicators: Bitcoin Dominance, ETH/BTC, Altseason Index
2. Allocate Funds Scientifically: Diversify, set targets, enforce stop-loss
3. Keep Learning: Understand project fundamentals, follow market trends, be cautious of risks

Altseason is not a shortcut to overnight riches but a trading opportunity that requires knowledge, discipline, and patience. Doing thorough research, controlling risks, and staying rational will help you profit from cyclical rotations.