Alt Season or Alt Correction?
The current market capitalization of the cryptocurrency market inspires hope in the hearts of digital asset holders. Since the beginning of the year, the altcoin market has grown by 90%, reaching a market capitalization of $111 billion.
While the market is experiencing favorable times and providing an opportunity for crypto supporters to earn profits, we would like to talk about the big picture in general terms. More specifically, we will touch on the issues of market capitalization, the dominance of Bitcoin, and using the examples of previous alt seasons as our guide, we discuss what we may expect of altcoins in the near future.
History of Previous Alt Seasons
To fully understand the altcoin market cycles, it is necessary to consider in detail the metric of Bitcoin dominance. Indeed, to understand the future, it is essential to study the past. The main sign of the alt season is a drop in the Bitcoin dominance index. For those who may not know, the dominance of Bitcoin is a percentage that measures the share of Bitcoin in the capitalization of the entire cryptocurrency market. While bitcoin dominance is not an ideal indicator, it helps to analyze the macro market.
One of the first and most significant alt seasons took place in the period from March-June 2017. Over that period, Bitcoin updated its historical maximum, after which it began to significantly lose its market leadership as investors started moving their capital to many other digital currencies for even higher returns. Although the capitalization of even the top altcoins is an order of magnitude less than that of Bitcoin, as investors diversified their crypto-funds into alts, BTC domination dropped from the record values of 85% to a crazy low of 37%. Many altcoins showed growth from 2,000% to 5,000% in a stunningly short time, propelling their values to new historical highs.
After completing the correction, Bitcoin began his formation again and continued on the same path. Bitcoin proceeded to update its historical figures in the following months with domination reaching the 67% mark.
During this period, from June to December 2017, altcoins realized significant and rapid growth before bitcoin stole the show again. The bitcoin dominance drop bounced to reach peak values from 60% to 90% in just a few months; it was the best of Bitcoin during this period.
December 2017-January 2018
The next season starts from mid-December 2017 to January 2018. Bitcoin reached its all-time high of $20,000, which, to this day, has not been able to update. Domination reached a local maximum of 67%.
After an absolute maximum, Bitcoin gradually began to decline to $15,000- $12,000 with small stops and pullbacks. Meanwhile, part of the capital from King cryptocurrency began to flow into altcoins. The growth of alts lasted less than a month, but during this period, most cryptocurrencies were able to provide the same increase as at the beginning of 2017.
The second currency, by market-capitalization, is Ethereum, which grew by 400% to Bitcoin in a month.
The remaining altcoins, which had a small capitalization, showed incredible growth. For some, it reached tens of thousands of percent in just a few weeks. During this time, most altcoins recorded new highs before the cryptocurrency market changed the bullish mood to a bearish one. At the peak, the total market value, including Bitcoin reached $835 billion! And this was the last significant alt season in the history of the crypto industry.
With the beginning of the bearish trend, another altcoin season followed in April, which lasted less than a month until May 2018. This mini alt season did not give us new highs; rather, it seems it was the last opportunity for investors to sell off their assets or at least acquire more Bitcoin before the start of crypto-winter. The market for the year lost more than 85% of its value. Many investors became disillusioned with digital assets and left the industry with heavy losses. On December 16, 2018, capitalization reached $100 billion.
From this, we can conclude that the period when the value of the Bitcoin dominance index is below 40% is the time when it is necessary to sell altcoins for Bitcoin. It is no coincidence that the strongest season is January 2018 after Bitcoin’s strong take-off in November-December 2017. And the weakest is May 2018, when in April Bitcoin was in a correction of a downtrend. The alt season occurs when Bitcoin stops after a long growth. The longer and stronger the growth, the more pronounced the increase of altcoins will be.
In the first half of 2019, the market began to recover gradually, but unfortunately, recovery was not in the cards for every crypto. For the period between April to July 2019, the dominance of Bitcoin reached 66%. Most currencies against Bitcoin continued to show weakness and continued to lose a substantial part of their value.
Thus, we can see that starting in April 2019, when the dominance of Bitcoin was at around 50%, investors still preferred to be in the first digital currency. Increased demand and interest from institutional investors led to a value of $14,000.
Has Alt Season Already Arrived?
By September, domination reached 71–72%, and it seemed that the altcoin market was slowly moving towards its death as, over the past 18 months, there was virtually no liveliness or interest even in promising projects.
But this trend changed from September-October last year. Although bitcoin’s value continued to decline, altcoins gradually began to show a slight increase, after a two-year fall.
Bitcoin slowly continues to lose a small part of its dominance, which allows some tokens to show a cost increase of 200–300% in recent months. News and technical analysis are increasingly starting to work out, and there are large trading volumes on assets that many have already put aside in the black box.
On the BTC domination chart below, we see funds as they move between bitcoin and alts and can draw some conclusions about the current state of the market and the prerequisites for the upcoming alt season.
For the onset of the alt season, there must be no strong movements in Bitcoin. It should be in a small channel or slow decline, which will gradually reduce the dominance of bitcoin and allow alts to get out of a protracted downtrend in the coming months.
If there is a robust growth of Bitcoin, as happened between April and July 2019, all capital goes into it, and alts standstill or even fall. If there is a substantial drop in Bitcoin, the market will panic, and everything will collapse.
But for many alts to reach their highs, the market needs new capital, new arrival of users, and positive news background. As a general rule, the excitement for cryptocurrencies often occurs when bitcoin updates its historical maximum, as seen both at the beginning and the end of 2017.
The information contains analysis and forecast of the cryptocurrency market, which are associated with high risks. This information is presented for informational purposes and in no way should be construed as a recommendation to buy or sell these assets. You must conduct your own thorough research before making any investment decisions. All risks, losses, and expenses associated with investing, including the complete loss of the main deposit, are your responsibility.