The year 2024 looks encouraging for the crypto universe. It is at this same time that more and more people are starting to mention the potential of an altcoin season. We are going to see what are the 3 important signals that could influence the start of an altcoin season.
What is altcoin season?
Typically, altcoin season is defined by the simple fact that several digital currencies (other than bitcoin) are outperforming bitcoin. The abbreviation altcoin is a mix between “alternative” and “coin” to clarify that these are other digital currencies available.
Bitcoin is in some ways the leader of cryptocurrencies, it is also the most capitalized. The democratization of crypto was first achieved by bitcoin. Therefore, he became in some way the “Apple” of cryptocurrency. In other words, it is also the most defensive asset in bear markets in the crypto industry. It can be considered the strongest digital asset as it has weathered a few storms and has over a decade of existence under its belt.
The 3 signals of the start of the altcoin season
We have experienced a few cryptocurrency bull cycles in the past so we are able to spot some similarities. There are no exact sciences, but there are a few signals that repeat themselves throughout the start of an altcoin season. Here are 3 signals that are generally repetitive:
1/ The transfer of interest from bitcoin to altcoins after a certain time
2/ The growth acceleration cycle is an important element for a sustainable bullrun
3/ The arrival of new projects, new ideas in the world of cryptocurrency
We are going to look in a little more detail at these three major factors.
The transfer of interest from bitcoin to altcoins
In a bullrun cycle, bitcoin is often the first asset to outperform. In the past, there wasn’t as much choice in the cryptocurrencies available. Therefore, bitcoin dominance was often 100%. However, since the covid crisis, the world of cryptocurrency has expanded exponentially. Of course, not all projects lead to Rome. This is why bear markets allow us to clean up. Generally, cryptos that survive a bear market have potential again. This demonstrates their ability to cope with difficulties. Bitcoin has been proof of this for over a decade. To better illustrate this, we can see the decline in bitcoin’s dominance over the years:
What interests us to have the signal of the start of the season on altcoins is the transfer of interest from bitcoin to altcoins. For this, we can use several useful indicators. For example, here is the altcoin season indicator. When the number is above 75, it means that more than 50 altcoins are outperforming bitcoin.
This type of indicator is also used for financial markets in general. Consequently, the dynamic is the same when all companies outperform the S&P500 index, this is a sign of health on the financial markets. When it comes to bitcoin, the dynamic is the same. When we have a sustained bullrun, that is to say one that lasts, this can be a sign that there is new interest in bitcoin. Once everyone is on board with bitcoin, interest will shift to altcoins since investors will want to take profits and seek performance elsewhere.
Economic growth, a key factor
Bitcoin is very sensitive to economic cycles. When we study the past, we can see that the biggest bitcoin bullruns occur during growth acceleration cycles. As supply and demand influence. Demand tends to increase in very good economic conditions as consumer sentiment improves. This also applies to bitcoin and then to altcoins. On the other hand, if we look at different economic indicators such as the conference board leading indicator, we can see a certain bottom several months ago followed by a rebound in the indicator. This is also the case for bitcoin, the bottom and the rebound took place.
As bitcoin is the one that has existed longer, it is also the one on which we initially base the study. Generally a lasting bullrun on bitcoin often results in a bullrun on altcoins, this is a criterion to take into account. For example, as illustrated in the table below, bitcoin is often the first to announce a bullrun followed by altcoins. (on the left the crypto capitalization excluding bitcoin and ETH and on the right only bitcoin).
Interest in other altcoins and new projects
As bitcoin is the oldest, it is often the leader. Interest will often focus first on the possible bullish cycle of bitcoin. In recent years, these are influencers in different forms, holders with strong convictions. Like any currency, the value of bitcoin is based on the value and credibility we have for it. But times have changed. For the last 5 years, we have been facing a process of institutionalization of bitcoin. Moreover, since January, we have had large ETF holders like Blackrock and Vanguard who have created their own spot ETFs. This is a big step forward in the democratization of bitcoin. From now on, we also have these big players who promote and attract investors to bitcoin, which increases the credibility and trust that we can have in it. All of this is generating initial interest in the crypto industry.
Once interest is well established and demand is supported by an excellent economic environment, we can accommodate new technologies in the industry. It is an environment conducive to raising funds for any type of project. This was the case during the last bullrun with first the arrival of the DEFI, then the NFTs, the web3. Today, we are facing the development of AI in the technological world.
CONCLUSION
We can see that the 3 main signals are present and in the process of maturing. This allows us to maximize the probabilities on a potential bullrun for altcoins. Obviously, even if there is no certainty about how things will develop, there are environments more conducive to putting the probabilities on one’s side.
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