Altcoin Cycle: From Definition to Effective Trading Strategies

2025-12-26 12:18:21

Cryptocurrency markets, like traditional financial markets, go through periods of dynamic activity and downturns. Among these, the “alt season” (altcoin cycle) is one of the most anticipated events by investors — a time when alternative cryptocurrencies to Bitcoin begin to shine and outperform in terms of profit.

As of the end of December 2025, the cryptocurrency market looks bright with Bitcoin trading at $88.57K USD and accounting for 55.092% of the total market capitalization. Ethereum (ETH) stands at $2.96K USD. This landscape creates optimistic signals, opening the possibility of a new altcoin cycle approaching. Understanding the nature of this phenomenon and how to apply suitable trading strategies is key to helping investors make informed decisions based on accurate information.

What Is Alt Season? Definition and Nature

The altcoin cycle refers to a phase in the cryptocurrency market when the total market capitalization of all altcoins (all cryptocurrencies excluding Bitcoin) surpasses Bitcoin in terms of price growth rate, often occurring during strong bull runs (bull run).

A prominent feature of alt season is a significant increase in both the price and trading volume of altcoins. When confidence in cryptocurrencies extends beyond Bitcoin, investor capital begins flowing into emerging crypto projects. This usually happens when Bitcoin’s price rises too high, making it difficult for retail investors to access, prompting them to seek opportunities in lower-priced altcoins.

###Difference Between Altcoin Cycle and Bitcoin Dominance Period

During alt season: The focus shifts from Bitcoin to other cryptocurrencies. The Bitcoin dominance index (Bitcoin dominance) drops below 50%, indicating a broader distribution of investments. Altcoins, from large-cap tokens to smaller projects, all have opportunities for strong growth. Capital especially flows into new technology sectors like DeFi, AI, GameFi, or trending topics.

During Bitcoin dominance: The market is highly concentrated on Bitcoin, with its dominance index rising above 70%. This is an unfavorable period for altcoins, as investors prefer Bitcoin — often called “digital gold” — which is considered safer. In a bear market (bear market), this trend becomes even more apparent as investors seek less risky assets.

History of Alt Season: Memorable Cycles

2017-2018: ICO Bubble and Altcoin Boom

This cycle began with Bitcoin dominance at 87%, then fell to 32% in January 2018 — the lowest in history at that time. Altcoin dominance surged as Bitcoin dominance declined.

Total market capitalization of cryptocurrencies increased from about $30 billion USD at the start of 2017 to over $600 billion USD within a year. Many altcoins reached all-time highs (ATH). This period was marked by the ICO craze (Initial Coin Offering), where thousands of new tokens were launched, attracting large investments based on speculation and hype.

2021: DeFi, NFT, and Memecoin Explosion

2021 saw a dramatic shift. Bitcoin dominance decreased from 70% to 38%, while the altcoin market share increased from 30% to 62% — nearly doubling. The cryptocurrency market surpassed $2 trillion USD for the first time, mainly driven by altcoins.

This cycle was characterized by a frenzy around DeFi projects (like Solana, Polygon), NFTs, and memecoins (Dogecoin, Shiba Inu, PancakeSwap). Even low-cap altcoins achieved enormous profits. The peak was Bitcoin reaching $69,000 USD and the total market cap exceeding $3 trillion USD by year-end.

2023-2024: New Alt Season with New Sectors

The current altcoin cycle, starting from Q4 2023, is driven by different factors. Not just ICOs or NFTs, but the rise of new sectors such as AI, GameFi, metaverse, DePIN (Decentralized Physical Infrastructure Networks), and Web3. Altcoins like Arweave, JasmyCoin, dogwifhat, Worldcoin, Fetch.ai have shown strong performance. The current market seems poised for a broader “rise” across various fields, rather than focusing on just one or two trends as before.

Signs of an Altcoin Cycle Beginning

Although there is no certain formula to predict alt season, the following indicators may suggest its emergence:

Sharp increase in altcoin dominance index: When the total market cap of altcoins grows rapidly compared to Bitcoin, it reflects a shift in investor sentiment.

Bitcoin dominance below 50%: This is a typical warning sign for the start of an altcoin cycle. When Bitcoin no longer holds absolute dominance, the market opens up to other options.

Sudden surge in altcoin trading volume: A significant increase in trading volume on exchanges indicates heightened interest and potential upcoming price increases.

Overall optimistic market sentiment: When confidence spreads throughout the crypto space, it often spills over into altcoins, boosting smaller projects.

Specific events: Launch of breakthrough altcoin projects, favorable regulatory approvals for cryptocurrencies, or ETF announcements from major regulators can trigger alt season.

Effective Trading Strategies During the Altcoin Cycle

Basic Principles for Traders

Conduct thorough research before investing: Before putting funds into any altcoin, deeply understand the project, development team, underlying technology, and real market potential. Don’t get swept up in optimism without understanding the fundamentals.

Diversify your portfolio: Apply the principle of “don’t put all your eggs in one basket.” Spread investments across multiple promising altcoins to reduce risk. A diversified portfolio helps balance potential losses and gains.

Set realistic profit expectations: The altcoin season can bring attractive profits, but don’t expect to get rich quickly. The crypto market is volatile, and prices can change rapidly in both directions.

Implement solid risk management: Always set stop-loss orders (stop-loss) to limit losses if prices move against your position. Maintain a balance between potential rewards and acceptable losses. Avoid investing all your capital in a single trade.

Choosing the Right Trading Platform

When selecting an exchange to participate in the altcoin cycle, consider the following factors:

Wide selection of altcoins: The platform should support a broad range of cryptocurrencies, from major projects to emerging tokens.
User-friendly interface: An intuitive trading interface helps you execute trades quickly.
Advanced security: Choose exchanges with strong two-factor authentication (2FA) and account protection features.
High trading volume: An exchange with high trading volume allows you to buy/sell at better prices without large spreads.

Basic steps when using an exchange:

Create an account and complete KYC verification as required
Enable two-factor authentication for added security
Deposit funds via supported (cryptocurrency or fiat currency) channels
Search for desired altcoins through the Market or Trading sections
Select appropriate order types (market orders for immediate trades, limit orders for specific prices)
Regularly monitor your portfolio

Hidden Risks During the Altcoin Cycle

High Volatility

Altcoins tend to be more volatile than Bitcoin. Prices can increase 100% within hours or drop just as sharply. The altcoin market has lower liquidity, leading to higher bid-ask spreads (bid-ask spread), increasing trading costs.

Price Bubbles and Speculation

Overheating and excessive speculation can artificially inflate prices, creating bubble risks. When investor sentiment turns, crashes can happen very quickly.

Scams and Rug Pulls

Beware of fake projects. Some developers may raise funds from investors and then abandon the project, causing a “rug pull.” Pump-and-dump schemes are also common, where insiders create artificial hype and then sell off.

Regulatory Changes

Regulations are a double-edged sword. Tightening regulations from major authorities can introduce market uncertainty and weaken investor confidence. Conversely, clear and favorable regulations can stimulate interest. For example, SEC approval of a Bitcoin spot ETF in 2024 encouraged institutional investors to participate, boosting overall market sentiment.

Conclusion

The altcoin cycle offers real opportunities for investors willing to face challenges and risks. By staying updated on market information, diversifying investments, and practicing disciplined risk management, traders can maximize profits during this period. Remember, educating yourself about the evolving market dynamics is the foundation for success in cryptocurrency trading.

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