Altseason: The Complete Guide to Trading Altcoins and Identifying Key Market Signals

The cryptocurrency market moves in waves of activity and calm, following its own development cycles. Among the most anticipated periods is the phenomenon when alternative cryptocurrencies begin to outperform Bitcoin — known as the altseason. This period attracts the attention of both experienced traders and newcomers seeking portfolio diversification opportunities.

In recent years, the mechanisms behind this phenomenon have significantly evolved. While previously the main driver was capital rotation between assets, now the key factors are increasing liquidity of stablecoins (USDT, USDC) and the inflow of institutional capital. As of December 2024, the market is in a state of optimism: expectations of a favorable regulatory environment, Bitcoin surpassing its all-time highs, and the market capitalization reaching $3.2 trillion create prerequisites for a prolonged altseason.

What is an altseason and how does it differ from Bitcoin season?

An altseason is a period when the total market capitalization of altcoins grows faster than Bitcoin, often accompanied by a significant decrease in Bitcoin dominance index. During such a period, investors begin to actively explore alternative projects, trying to find higher-yield opportunities.

Unlike Bitcoin season, when attention is focused on the main digital asset, Bitcoin dominance index rises, and enthusiasm for alternative projects wanes. Usually, this occurs amid general market uncertainty or bearish sentiment, when investors seek safer assets.

Evolution of altseasons: from speculation to market maturity

Early cycles: dominance of capital rotation

In the early crypto supercycles, altseasons formed through a simple mechanism — when Bitcoin’s price stabilized, traders moved their funds into altcoins seeking higher growth. This pattern defined the ICO era of 2017-2018 and the wave of DeFi projects in 2020. The global market capitalization grew from $30 billion to over $600 billion, but the altseason ended as quickly as it started when regulators began tightening requirements.

Modern stage: liquidity and institutional capital

Modern altseasons operate differently. Instead of simple capital rotation from Bitcoin to altcoins, the decisive factors now are:

• Stablecoin liquidity: Increased trading volumes in altcoin-USDT and altcoin-USDC pairs facilitate investor entry and exit, creating a healthy trading ecosystem.

• Institutional inflow: Approval of spot ETFs for Bitcoin and Ethereum attracted large investors seeking diversification beyond the main asset. Over 70+ spot Bitcoin ETFs had been approved by 2024.

• Technological innovations: Blockchain ecosystems are developing, with new use cases emerging in DeFi, NFTs, artificial intelligence, and gaming mechanics.

Four phases of liquidity flow during an altseason

Understanding the cyclical nature of altseasons helps traders position themselves more advantageously.

Phase 1: Bitcoin strengthening

At this stage, capital flows into Bitcoin as a stable and reliable asset. Bitcoin’s dominance index is high, trading volumes in altcoins are minimal, and prices for alternative projects are in depression. This is a preparatory period before sentiment shifts.

Phase 2: Ethereum awakening

Liquidity begins shifting to Ethereum and second-layer projects (Layer-2 solutions). The ETH/BTC ratio increases, and the DeFi sector becomes more active. This signals that major players are starting to reassess the potential of ecosystems beyond Bitcoin.

Phase 3: Growth of major altcoins

Attention shifts to projects with established history and functionality: Solana ($123.87 per token, +1.81% in 24h), Cardano, Polygon, and others begin to demonstrate double-digit growth. These projects attract both retail and institutional investors.

Phase 4: Full-blown altseason

In the final stage, activity spreads to lower-capitalization altcoins, including meme coins and speculative projects. Bitcoin dominance drops below 40%, and the parabola of growth becomes more pronounced. This period requires the utmost caution regarding risk management.

Key indicators of the start of an altseason

1. Bitcoin dominance index

A classic signal — when dominance drops below 50%, it often foreshadows the start of an altcoin rally. Historically, such declines have correlated with the beginning of altseason phases.

2. ETH/BTC ratio

An increasing Ethereum-to-Bitcoin price ratio indicates capital shifting toward alternative projects. This metric serves as a barometer of altseason health.

3. Trading volumes in stablecoin pairs

An increase in trading volumes in altcoin-stablecoin pairs often precedes broader rallies. Currently, this metric is becoming more significant than simple capital rotation.

4. Sector activity

Explosive growth in certain niches serves as an indicator. For example, in recent months, meme coins (DOGE $0.13, BONK, PEPE, WIF $0.32) grew by over 40%, indicating retail interest and market readiness for broader movements.

5. Social signals and sentiment

An increase in mentions of altcoins on social media, growing interest among influencers — all reflect an emotional shift in favor of alternative assets.

Historical altseasons: lessons from the past

2017-2018: ICO era

The first major altseason was triggered by the explosion of initial coin offerings. Bitcoin dominance fell from 87% to 32%, market capitalization soared from $30 billion to $600 billion. However, regulatory measures and a wave of scams led to a dramatic crash.

2021: DeFi and NFT revolution

The second significant altseason was driven by the boom of decentralized finance and non-fungible tokens. Bitcoin dominance dropped to 38%, and the share of altcoins rose to 62%. Total crypto market capitalization reached $3 trillions. The growth was more organic due to real technology adoption.

2023-2024: Institutional recognition

The current cycle differs from previous ones. Approval of spot ETFs, influx of large capital, and stricter regulation create conditions for more sustainable growth. Sectoral diversity (AI, GameFi, Web3, DePIN) indicates ecosystem maturity.

Projects related to artificial intelligence showed particular strength: tokens like Render grew by several hundred percent, reflecting demand for AI solutions in crypto. Akash Network (AKT $0.37), Solana (SOL $123.87), and NEAR Protocol (NEAR $1.53, +3.66% in 24h) demonstrated steady growth thanks to ecosystem development.

Investing in altcoins: a practical approach

Step 1: Choosing a platform and security

The first step is selecting a reliable exchange with a good reputation, a wide selection of altcoins, and high security standards. After registration, activate two-factor authentication and complete identity verification (KYC).

Step 2: Funding your account

Most platforms accept both fiat deposits (credit/debit cards, bank transfers) and crypto transfers. Peer-to-peer markets are also often available for direct fiat-to-crypto exchange.

Step 3: Finding and analyzing altcoins

Using exchange search tools, find the desired altcoin by ticker or name. Before purchasing, conduct thorough research:

• Study the project’s whitepaper (whitepaper)
• Evaluate the development team
• Analyze the use of resources and community activity
• Check trading volumes and liquidity

Step 4: Placing orders

On spot markets, several order types are available:

• Market order: buy immediately at the current price
• Limit order: set a target purchase price and wait

Some platforms offer advanced tools: margin trading, futures contracts, trading bots, and other options for automation.

Step 5: Managing assets

After purchase, altcoins are on your exchange balance. You can:

• Store them on the exchange for convenient trading
• Transfer to a personal wallet for security
• Participate in staking and earn programs for additional income
• Exchange for other cryptocurrencies

Trading strategies during an altseason

Research before investing

Avoid hype without understanding the project fundamentals. The best way to start is to understand the problem the project aims to solve and evaluate its competitive advantages.

Portfolio diversification

Distribute investments across multiple altcoins and sectors. This reduces the risk of total loss if one project turns out to be unsuccessful.

Realistic expectations

Although an altseason can be profitable, don’t expect instant riches. Remember, the market is volatile, and prices can fluctuate rapidly in both directions.

Risk management

Always set stop-loss orders to limit potential losses. Maintain a balance between potential rewards and acceptable losses. Use position sizing aligned with your risk profile.

Gradual profit-taking

Instead of exiting all positions at once, consider systematically closing part of your holdings as the price rises. This allows you to lock in profits while maintaining some exposure for further growth.

Main risks of an altseason

Increased volatility

Altcoins are usually much more volatile than Bitcoin. Prices can change direction within hours, potentially leading to significant losses for traders without proper risk management.

Hype and bubbles

Excessive enthusiasm and speculation often create price bubbles that inevitably burst. Projects that seem promising may be overvalued.

Fraud and “rug pulls”

Be cautious of projects where developers may suddenly abandon the project after raising funds. Also avoid pump-and-dump schemes where groups artificially inflate prices and then sell at high levels.

Regulatory uncertainty

Changes in regulation can unexpectedly impact the entire altseason. Favorable regulatory environments can catalyze growth, but adverse actions by regulators can halt it.

The impact of regulation on altseason

Regulatory environment plays a decisive role in the duration and intensity of an altseason. Historically, strict regulatory measures against ICOs in late 2018 and tightening requirements for crypto exchanges led to abrupt end of altseasons.

Conversely, positive regulatory events stimulate growth. Examples include:

• Approval of Bitcoin spot ETFs by SEC in early 2024
• Potential approval of Ethereum spot ETFs
• Favorable stance on cryptocurrencies with a new administration

Expectations around the potential creation of an XRP ETF and other altcoins indicate growing institutional recognition, which could support an altseason.

Conclusion

An altseason is a dynamic period in the crypto market requiring both knowledge and discipline. The altcoin market evolves from speculative hype to a more mature ecosystem driven by technological innovation, institutional capital, and healthy liquidity.

Successful trading during an altseason involves:

• Continuous learning and project research
• Strict risk management
• Portfolio diversification
• Emotional discipline
• Monitoring key market indicators

Traders who understand market cycles, watch for altseason signals, and practice sound risk management significantly increase their chances of maximizing opportunities and minimizing losses during these exciting periods of the cryptocurrency market.