When does the altseason occur: a complete guide to trading altcoins and identifying entry points

The cryptocurrency market operates cyclically, and understanding these cycles is key to successful trading. One of the most significant phenomena in this context is what traders call the altcoin activity phase. This is a period when the total market capitalization of altcoins begins to surpass Bitcoin’s metrics, opening new opportunities for investors. As of December 2024, the market is already signaling the onset of this phase, driven by several factors: the potential pro-cryptocurrency stance of the new US administration, Bitcoin’s fourth halving in April, and growing approval of spot ETFs for crypto assets.

What is the Altcoin Activity Phase

This phenomenon marks a phase when the combined market capitalization of alternative cryptocurrencies exceeds Bitcoin’s figures amid a bullish market. Unlike early cycles, where there was simple capital rotation from BTC to altcoins, current periods are characterized by increased trading volumes of alternative assets in pairs with stablecoins and higher liquidity.

This change reflects market maturation, where institutional capital inflows and new participants foster organic growth in demand for alternative projects. The period is usually accompanied by a decline in Bitcoin dominance index, a surge in trading activity, and heightened speculative interest from retail investors.

Difference Between Altcoin Activity Periods and Bitcoin Dominance

During the altcoin activity phase, market attention shifts from Bitcoin to other projects. This shift manifests in significant price increases and trading volume growth. Such surges are influenced by speculative trades, the launch of innovative projects, technological breakthroughs, and increasing utility of assets that attract new investors. As a result, many altcoins demonstrate rapid growth, often outperforming the main asset in returns.

The opposite scenario—a Bitcoin dominance period—is characterized by a shift of attention and capital toward BTC. During these times, the Bitcoin dominance index rises, indicating investor preference for the most liquid and safest asset. This can occur amid general uncertainty when traders seek to minimize risk by choosing between Bitcoin and stablecoins.

Evolution of Altcoin Activity Mechanisms

From Simple Rotation to Systemic Liquidity

Historically, altcoin activity periods arose from capital inflows from Bitcoin into altcoins when the main asset’s price consolidated. This led to ICO booms in 2017 and a surge of interest in DeFi in 2020. However, the dynamics have significantly changed.

Modern experts note that trading volumes of altcoins against stablecoins (such as USDT and USDC) now play a more significant role than simple rotation from Bitcoin. This indicates genuine demand growth and infrastructure development, rather than just speculative fluctuations. Increased stablecoin liquidity lowers entry barriers for new investors and facilitates movement between different alternative projects.

The Role of Ethereum and Institutional Capital

Ethereum often leads during altcoin activity phases thanks to its developed DeFi and NFT ecosystem. Market analysts forecast that Ethereum’s growth will continue to stimulate the overall altcoin rally, especially as institutional investors diversify portfolios beyond Bitcoin. Platforms like Solana attract significant interest due to their features and expanding ecosystems.

The Dominance Index as a Predictor

A sharp decline in Bitcoin dominance below 50% historically signals the start of an altcoin activity period. Some analysts note that Bitcoin’s consolidation within a certain price range (such as recently around $91,000–$100,000) can create conditions for liquidity outflows into alternative projects.

Specialized Analytical Tools

There are tools that measure the performance of the top 50 altcoins relative to Bitcoin. An index value above 75 indicates that most altcoins already outperform Bitcoin in profitability. As of December 2024, such indices have risen to 78, signaling that the altcoin activity phase has already begun.

Historical Examples of Altcoin Activity Periods

2017-2018: The ICO Era

Bitcoin dominance fell from 87% to 32%, while the wave of initial coin offerings introduced projects that attracted speculative capital. Total market capitalization grew from $30 billion to over $600 billion. However, regulatory actions and failures of many projects led to a sharp end of this cycle in 2018.

2021: DeFi, NFT, and Meme Coin Boom

At the start of the year, Bitcoin’s dominance dropped from 70% to 38%, while the altcoin share increased from 30% to 62%. This period was characterized by massive interest in decentralized finance, digital art, and experimental tokens. The total market capitalization reached record highs of $3 trillions.

2023-2024: Multi-sector Growth

Unlike previous cycles driven by homogeneous interest, the current period shows diversity. Strong growth is observed in projects related to artificial intelligence (such as Render, Akash Network, which saw over 1000%) growth, blockchain games (ImmutableX, Ronin), and meme coins integrating new utilities. The Solana ecosystem experienced a recovery with a 945% increase.

Four Phases of Altcoin Activity Development

Phase 1: Bitcoin Dominance

Capital concentrates in Bitcoin as a safe asset. The dominance index rises, BTC volumes increase, while altcoins stagnate.

Phase 2: Ethereum Activation

Liquidity begins shifting toward Ethereum. Interest in DeFi and Layer-2 solutions grows, and the ETH/BTC ratio increases.

Phase 3: Major Altcoin Rally

Attention shifts to established alternative projects with developed ecosystems. Projects like Solana, Cardano, Polygon demonstrate double-digit growth.

Phase 4: Full Altcoin Activation

At this stage, Bitcoin dominance drops below 40%, and capital actively flows into smaller-cap altcoins and more speculative projects, often reaching parabolic growth.

How to Identify the Beginning of the Altcoin Activity Phase

Several key indicators help anticipate or confirm this phase’s start:

Bitcoin Dominance Index Drop: Falling below 50% has historically preceded altcoin activity periods.

ETH/BTC Ratio: Rising Ethereum to Bitcoin price ratio serves as a measure of the relative strength of alternative assets.

Specialized Indices: Tools measuring the top 50 altcoins’ performance above 75 points indicate altcoin activity.

Trading Volume Growth: Increased volumes in altcoin-stablecoin pairs, especially in trending sectors (AI, meme coins, GameFi), signal rising confidence.

Social Media Waves: Sharp increases in mentions, memes, and influencer discussions often precede retail interest.

Sentiment Shift: Transition of sentiment indices from fear to greed indicates a bullish impulse.

Stablecoin Liquidity: Availability of USDT, USDC, and other stablecoins facilitates new capital entry and boosts trading volumes of alternative assets.

Main Trends Shaping the Current Cycle

Institutional Adoption: Approval of spot Bitcoin ETFs has led to large capital inflows and increased market confidence.

Regulatory Shifts: Potentially favorable regulatory environment creates a foundation for further growth and diversification of investments.

Record Capitalization: The global crypto market cap has reached $3.2 trillion, surpassing previous highs.

Approaching Psychological Levels for Bitcoin: Approaching $100,000 for the main asset fosters optimism within the community.

These factors together create conditions for a prolonged and multi-layered altcoin activity period.

Key Tips for Trading During the Altcoin Activity Phase

Conduct Thorough Research: Before investing in any altcoin, study the project, team, technology, and market potential. Avoid following hype blindly.

Diversify Positions: Spread investments across various promising altcoins and sectors to reduce risks.

Set Realistic Goals: While altcoin activity periods can be profitable, do not expect instant riches. Remember market volatility.

Apply Risk Management: Use stop-loss orders, maintain a healthy balance between potential profit and acceptable losses.

Risks and Features of Altcoin Activity Periods

Despite attractive opportunities, be aware of risks:

Increased Volatility: Altcoin prices are usually more unstable than Bitcoin, which can lead to significant losses.

Speculative Bubbles: Excessive hype can artificially inflate prices, creating crash conditions.

Fraud and “Rug Pulls”: Beware of projects where developers abandon the project after attracting investments.

Regulatory Risks: Unexpected regulatory actions can sharply change market dynamics. Examples include regulatory measures against ICOs in 2018 or stricter guidelines for crypto platforms.

Conversely, positive regulatory developments, such as recognition of crypto assets or approval of related instruments, can stimulate interest and drive altcoin activity phases.

Conclusion

The altcoin activity period offers a window of opportunity for informed investors. The key to success is staying updated on market trends, diversifying your portfolio, and applying disciplined risk management. Studying market mechanisms, analyzing key indicators, and adhering to sound trading principles will help maximize potential gains during this volatile but often profitable stage of the cryptocurrency cycle.