Intro
Altcoin season (or alt season) is a period in the crypto market when alternative coins outperform Bitcoin, the leading cryptocurrency.
Alternative coins, or altcoins, is a term widely used to refer to any cryptocurrency that isn’t Bitcoin.
Any period in the market where altcoins surpass Bitcoin as an alt-season. This is usually marked by the Bitcoin dominance ratio going lower than before the season's start.
Key Takeaways
According to Blockchain Center's' Altcoin Season Index,' an altcoin season happens when 75% of the top 50 altcoins outperform Bitcoin in market capitalization during the last 90 days;
Altcoin season is a crypto phenomenon where most cryptocurrency prices jump, except for Bitcoin;
Altcoin means an "alternative coin," any other crypto excluding Bitcoin (BTC). The name is based on the idea that Bitcoin was the very first cryptocurrency and that all other coins are alternatives to Bitcoin.
Main Causes of Alt Season
Source: CryptoPotato
Alt Seasons are usually caused by new trends in the cryptocurrency industry that end with the launch of many new projects. Going back to 2017, the rise of initial coin offerings (ICOs) provided an opportunity for startups to raise funds even when they had no working product. There were roughly 4000 cryptocurrencies, with their value sucking Bitcoin’s dominance levels.
Many new projects entered the market, with prices drowning and the alt market made them jump up. The worst thing is that over 90% of projects launched that year turned out to be phony. Many late investors lost their money, contributing to a 2018 bear cryptocurrency market.
Fast forward to 2020, the boost of decentralized finance (DeFi), non-fungible tokens (NFTs), and play-to-earn games, turned into the creation of even more cryptocurrencies. The main idea of DeFi is to provide financial products that function independently of any intermediaries. New coins and tokens are being created to fuel such products, with some projects having 2-3 tokens for their community.
Now, more than 20,000 cryptocurrencies exist and Bitcoin’s dominance is hovering near 40%. Many altcoins have also had a good run-up, coinciding with Bitcoin’s rally which started in 2020.
While there have also been periods of peak altcoin performance throughout the industry’s history, altcoin prices remain correlated mainly to Bitcoin. Any sharp increase in Bitcoin prices often has a similar effect on altcoins, albeit not simultaneously. Also, any rapid decline in Bitcoin’s price takes a toll on the market with alts shedding more gains.
Alt Season Indicators
You probably won’t find a perfect indicator of an incoming alt-season. However, Blockchain Center provides a tool for measuring market sentiment and determining whether the market is in Bitcoin or alt-season.
(Source: Blockchain Center)
The tool defines an altcoin season as a three-month period where 75% of the top 50 coins perform better than Bitcoin.
Industry observers also believe that the following signs theoretically confirm that an alt-season is around the corner:
New Trends: As noted earlier, the emergence of trends that accelerate the creation of many new coins can cause bitcoin’s dominance to shrink and many of the newly launched altcoins to grow in value.
Large Cap Altcoins Get: When notable altcoins such as Ether (ETH), Solana (SOL), and Binance Coin (BNB) gain more in price than Bitcoin, it could be considered an indicator that value might as well flow to other altcoins, thus kicking off an alt-season.
Bitcoin Dominance Decline: It’s a kind of trend that, a bullish market performance for Bitcoin often ends with a period of gains for altcoins as soon as BTC takes a break. Such a trend is usually a result of new investors investing money into altcoins while thinking that Bitcoin is expensive and that altcoins still have a large room to grow.
Thus, any consistent decline in Bitcoin’s dominance is an indicator of the upcoming alt season.
Top 5 Alt Season Cryptos
So, what are those top altcoins that look rather promising to grab some profit? There are more new projects on the horizon, but we’ve chosen another line, to keep those ones that are credible and trustworthy.
Cardano (ADA)
- Market cap: $13.8 billion
Cardano’s ADA is a top altcoin for several reasons to consider for the upcoming altcoin season. To start with, Cardano is an open-source blockchain that has the Ouroboros proof-of-stake model, making it a more efficient, scalable, and secure platform than traditional proof-of-work blockchains.
Further, Cardano aims to address several issues other cryptocurrencies face. The main problems include scalability, attachment to rules, voter fraud, and interoperability.
Besides, Cardano's peer-reviewed technology gives it legitimacy, and it's a cutting edge over its competitors, making it hugely popular in the run-up to the crypto altcoin season. Cardano's focus on efficiency, security, and innovation makes it one of the top options for the altcoin season 2023.
Solana (SOL)
- Market cap: $8.1 billion
Solana was developed to help power decentralized finance (DeFi) uses, decentralized apps (DApps) and smart contracts, so it runs on a unique hybrid proof-of-stake and proof-of-history mechanisms to make transactions quickly and securely. SOL, Solana’s native token, powers the platform.
It seems that the SOL token is currently underpriced as it suffered from a 75% price reduction after the FTX bankruptcy. SOL is now priced at just $13 but should reclaim its previous all-time high (ATH) of $260, which makes it one of the best altcoins to buy. Still, Solana is a separate organization and is expected to grow substantially from the current price level.
Ethereum (ETH)
- Market cap: $226.0 billion
Ethereum is considered a beneficial choice for the next alt season due to several reasons. First of all, it is the largest and the most well-known altcoin in the market, with widespread ownership and a vigorous network.
Moreover, many altcoins are minted on the Ethereum blockchain, which further drives up the demand for Ethereum during the altcoin season. At the time of writing, ETH’s selling price was nearly $1,653.
Additionally, Ethereum’s prices are trading at a notable discount compared to its earlier all-time high, making it a worthy investment opportunity. Despite multiple bear markets, Ethereum has consistently gone back the track, which is decent evidence of its flexibility and future growth potential. It plays as one of the best crypto winter tokens.
Overall, Ethereum’s market authority, growing ecosystem, and strong fundamentals make it a favorable choice for investors aiming to capitalize on the potential growth of the crypto alt season.
XRP (XRP)
- Market cap: $26.0 billion
XRP is known as one of the crypto world’s fastest and most cost-effective payment networks. The platform has cross-border transactions with low transaction fees and fast processing times. This makes XRP preferable for businesses and financial institutions. It can also lead to increased adoption of XRP in the future.
Ripple has strategically partnered with several organizations, such as banks and payment providers, giving XRP even more perks. This integration with traditional financial institutions could lead to a surge in demand for XRP, which would positively impact its price.
Finally, the ongoing SEC lawsuit against Ripple has made the market uncertain, which has caused XRP’s value to drop.
Still, XRP’s potential for growth and adoption makes it a top altcoin to consider in the coming altcoin season, as well as one of the most searched cryptos.
Binance Coin (BNB)
- Market cap: $49.3 billion
Binance Coin (BNB) is a strong competitor for the next altcoin season for the following reasons. Firstly, BNB is Binance's native token, one of the world's largest and best-known cryptocurrency exchanges. It gives BNB a serious use case and utility within the Binance ecosystem.
Binance users can use BNB to pay for the following:
- Transaction;
- Listing;
- Trading fees.
This naturally leads to a persistent demand for BNB and strengthens its foundation for growth. Currently, BNB is trading at around $300, striving to mark higher highs and lows on its price chart.
Binance has developed its services and offerings, increasing demand for BNB. Binance has launched several new products and services, such as the Binance Smart Chain, Binance Launchpad, and Binance NFT Marketplace. All this has boosted the usage and demand for BNB.
Finally, Binance has a solid history of innovation and growth, which can be an indicator of promising the future of BNB. Binance has demonstrated an ability to adapt and evolve alongside the cryptocurrency market, enabling it to stay ahead of its competitors.
Bottom Line
So, let’s sum that up. Altcoin season can be perfect for crypto holders to diversify their portfolios and seize investment opportunities.
However, diversification and a long-term investment mindset are key. It’s essential to have a well-rounded portfolio with a mix of cryptocurrencies, including well-known ones like Bitcoin (BTC) and Ethereum (ETH), and carefully selected altcoins with growth potential.
It’s critical to have a balanced approach. Staying informed about the dynamic crypto market will be crucial in managing the altcoin season and maximizing the investment opportunities it may present in 2023 and beyond.
Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.