How does the altcoin season actually work? Unlock the secrets of the crypto cycle

Cryptocurrency markets cycle like tides, with market enthusiasm shifting between different assets. The most critical phenomenon is the so-called Altcoin Season—periods when cryptocurrencies other than Bitcoin become the focus. Understanding this cycle is essential for traders seeking to profit in volatile markets.

Core Definition of Altcoin Season

Altcoin season refers to periods during a bull market when the total market capitalization of altcoins surpasses that of Bitcoin. Unlike early phases driven purely by capital rotation, current altcoin seasons exhibit deeper market structural changes—an increase in stablecoin liquidity and ongoing institutional capital inflows are reshaping this dynamic.

In the past, altcoin seasons were driven by speculators seeking higher returns after Bitcoin’s rise, shifting funds into alternative tokens. Today, however, abundant liquidity in stablecoins (such as USDT, USDC) attracts genuine market participants rather than just speculative hype.

Differences Between Altcoin Season and Bitcoin Season

Characteristics of Altcoin Season:

• Market focus shifts from Bitcoin to other cryptocurrencies
• Altcoin prices and trading volumes surge, often outpacing Bitcoin gains
• Technological innovation and new project launches become main buying drivers
• Retail speculation is high, with a variety of narratives emerging

Characteristics of Bitcoin Season:

• Investors prefer Bitcoin for its stability and “digital gold” status
• Bitcoin dominance index rises
• During bear markets, funds concentrate in Bitcoin or stablecoins
• Market risk aversion leads to stagnation or depreciation of altcoins

Evolution of Altcoin Seasons

From Capital Rotation to Liquidity-Driven

During the 2017 ICO boom and the 2020 DeFi summer, altcoin seasons were typically driven by capital shifting after Bitcoin’s gains saturated. However, market narratives have changed—today, stablecoins play a more critical role in trading volume for altcoins, reflecting real market growth rather than mere speculation.

CryptoQuant CEO Ki Young Ju points out that modern altcoin seasons are driven from passive capital rotation to active liquidity injection, with stablecoins becoming the infrastructure of the contemporary altcoin market.

Ethereum Leads, Institutional Participation

Ethereum often takes the lead during altcoin seasons, with its extensive DeFi and NFT ecosystems attracting institutional investors. Fundstrat analyst Tom Lee predicts Ethereum’s momentum will continue across the entire altcoin market, especially as institutional funds begin to diversify.

The entry of institutional investors signals increased market maturity—they tend to allocate to assets with solid fundamentals like Solana and Ethereum.

Bitcoin Dominance—A Predictive Indicator

Renowned analyst Rekt Capital emphasizes that Bitcoin’s dominance remains a key indicator for predicting altcoin seasons. Historical data shows that when Bitcoin’s dominance sharply falls below 50%, it is usually a clear signal that an altcoin season is imminent.

Currently, Bitcoin consolidates between $90,000 and $100,000, which could create ideal conditions for Ethereum and other altcoins to capture liquidity.

Altcoin Season Index as a Guide

The Altcoin Season Index developed by Blockchain Center offers a quantitative reference—measuring the performance of the top 50 altcoins relative to Bitcoin. An index reading above 75 indicates the market has entered altcoin season. As of December 2024, the index has risen to 78, confirming the market has shifted into altcoin season territory.

Historical Overview of Altcoin Seasons

Late 2017 to Early 2018: ICO Gold Rush

During this period, Bitcoin’s dominance plummeted from 87% to 32%, and altcoins experienced massive growth. The ICO craze attracted speculators into projects like Ethereum and Ripple, with total crypto market cap soaring from $30 billion to over $600 billion. Most altcoins hit all-time highs, but regulatory crackdowns ultimately ended this rally in 2018.

Early 2021: DeFi and NFT Explosion

Bitcoin’s dominance declined from 70% to 38%, while the share of altcoins surged from 30% to 62%. DeFi protocols, NFT projects, and meme coins exploded, with small-cap tokens gaining multiples of their previous value. Retail adoption and technological advances drove the crypto market cap to a record high of $3 trillion.

Q4 2023 to Mid-2024: Era of Diversified Narratives

Expectations of Bitcoin halving and approval of spot ETFs for Ethereum boosted market optimism. Unlike previous ICO and DeFi-driven phases, this altcoin season features diversification—AI tokens, GameFi, meme coins, DePIN, and more are flourishing.

AI projects like (RNDR) and Akash Network (AKT) surged over 1000%. GameFi platforms like (IMX) and Ronin (RON) are experiencing strong revival. Meme coins based on Solana reversed from the “dead chain” label, with ecosystem tokens soaring up to 945%.

Q4 2024: Institutional Era Approaching

Over 70 spot Bitcoin ETFs have been approved, injecting institutional liquidity into the market. The global crypto market cap has risen to a record $3.2 trillion, surpassing the 2021 peak. The Biden administration’s pro-crypto regulatory stance may further boost investor confidence.

Bitcoin is making a push toward the psychological milestone of $100,000, with most analysts expecting this level to be broken within the year and to continue rising into 2025.

Four Stages of Liquidity Shift in Altcoin Seasons

Stage 1: Bitcoin Foundation Building

Funds continue flowing into Bitcoin as a safe haven, increasing Bitcoin dominance, while altcoins remain relatively quiet. During this phase, BTC trading volume leads, and altcoin prices stagnate.

Stage 2: Ethereum Activation

Liquidity begins shifting toward Ethereum, with attention on DeFi and Layer 2 projects. The ETH/BTC ratio rises, Ethereum prices surge, and on-chain activity heats up.

Stage 3: Mainstream Altcoin Rebound

Large-cap altcoins (such as Solana, Cardano, Polygon) see double-digit gains, with mature ecosystems gaining institutional recognition.

Stage 4: Micro-Cap Altcoin Explosion

Ultra-small market cap projects and speculative tokens take the stage, Bitcoin dominance drops below 40%, and altcoins experience parabolic growth.

How to Identify the Arrival of Altcoin Season

Seven Key Signals:

1. Sudden Drop in Bitcoin Dominance: Falling below 50% is a classic signal for altcoin season initiation.

2. ETH/BTC Ratio Rising: The higher this ratio, the stronger Ethereum relative to Bitcoin, indicating broader altcoin market strength.

3. Altcoin Season Index Over 75: Quantitative tools confirm the market has entered altcoin season.

4. Altcoin-Stablecoin Trading Volume Surge: Explosive growth in trading volume for sectors like AI tokens and meme coins signals larger market moves.

5. Shift in Social Sentiment: Increased discussion, hashtags, memes, and KOL mentions focus on altcoins.

6. Market Sentiment Turning from Fear to Greed: Rising Fear & Greed index suggests buying interest.

7. Expansion of Stablecoin Liquidity: Increasing supply of USDT and USDC, with more trading pairs, lowers entry barriers.

Practical Guide to Trading in Altcoin Season

Capital Entry Process

First, create an account and complete identity verification, then enable two-factor authentication for security. Funds can be deposited via crypto transfer or fiat deposit. Some exchanges support P2P markets, allowing more flexible entry and exit.

Once funds are in, navigate to the trading section to find target altcoins. Use market orders for quick execution or limit orders for precise entry, choosing spot, margin, or futures based on risk appetite.

Some platforms offer automated trading bots, allowing users to set strategies for automatic execution. After purchase, view holdings in the asset section, and choose to hold, trade, or withdraw. Certain altcoins support staking or lending to generate passive income.

Trading Golden Rules

Thorough Research Before Entry: Deeply understand project fundamentals, team background, technological innovation, and market potential. Avoid being misled by hype; blindly following trends often results in significant losses.

Diversify Portfolio: Avoid concentrating all funds in a single altcoin. Spread investments across different sectors and market caps to reduce single-point risk.

Set Realistic Expectations: Altcoin seasons do offer high-profit opportunities, but there are no guarantees of overnight riches. Expect market volatility and rapid price swings.

Strict Risk Management: Set stop-loss orders, control position sizes, and avoid over-leverage. Many traders fail due to neglecting risk controls.

Hidden Risks of Altcoin Seasons

Four Major Threats

Volatility Traps: Altcoin prices are far more volatile than Bitcoin, risking significant short-term losses. Low-liquidity small-cap coins often face wider spreads and higher costs.

Speculative Bubbles: Excessive hype can artificially inflate prices, creating bubbles that eventually burst. Be wary of projects driven solely by narratives rather than fundamentals.

Scams and Pump-and-Dump Schemes: Malicious actors exploit altcoin season enthusiasm to orchestrate scams. Pump-and-dump schemes, in particular, can lead to quick profits for organizers and huge losses for latecomers.

Regulatory Uncertainty: Changes in regulatory policies across countries can dramatically impact market sentiment. Negative regulatory news can instantly crush market optimism.

How Regulation Can Rewrite Altcoin Season?

Regulatory developments have complex and far-reaching impacts on altcoin seasons. Negative regulation—such as the crackdown on ICOs in 2018 or strict guidance on exchanges—often triggers panic, increased volatility, and cooling of enthusiasm.

Conversely, positive regulatory signals can ignite markets. When jurisdictions establish clear legal frameworks for crypto assets or regulators show support for blockchain innovation, both institutional and retail investors are attracted. The approval of spot Bitcoin ETFs by the U.S. SEC is a prime example—this encourages institutional participation, enhances overall market credibility, and can accelerate altcoin season.

Regulatory developments are crucial; traders should closely monitor global policy trends, as they can fundamentally alter the trajectory of altcoin seasons.

Seizing Opportunities in Altcoin Season

Altcoin season opens opportunities for investors willing to accept risk and plan carefully. By staying informed, diversifying reasonably, and strictly managing risks, traders can potentially amplify profits during this period.

Deep market research, understanding liquidity flows, tracking Bitcoin dominance and altcoin season index, will significantly improve trading success. Education and self-improvement are always the surest paths to consistent gains.

Remember, altcoin season is full of opportunities but also hidden dangers. Caution, discipline, and continuous learning are the keys to long-term survival.