Altseason: definition, history, and trading strategies for promising tokens

The cryptocurrency market develops cyclically, with periods of heightened and reduced activity. One of the most anticipated phenomena among investors is the altseason, when altcoins begin to significantly outperform Bitcoin. As of December 2024, the altseason index has reached 78, signaling that the market is already entering this phase. It is expected that favorable political conditions in the USA and growing institutional participation could lead to a prolonged period of altcoin growth, making understanding this phenomenon critically important for all market participants.

What is an altseason and how does it differ from a Bitcoin rally

Altseason is a period when the total market capitalization of altcoins exceeds that of Bitcoin, usually against the backdrop of a general bullish market. Unlike Bitcoin dominance seasons, altseasons are characterized by significant price increases and trading volume growth in alternative cryptocurrencies.

A key distinguishing feature of the modern altseason is the transformation of its drivers. If previously the altcoin rally was simply related to capital rotation from Bitcoin into altcoins, now the decisive role is played by liquidity in stablecoins (USDT, USDC) and the inflow of institutional capital. This reflects real market growth driven by innovation, not just speculation.

During an altseason, the following are observed:

• Sharp decline in Bitcoin dominance index (often below 50%)
• Significant increase in trading volumes in altcoin-stablecoin pairs
• Intensified retail speculation and interest in riskier assets
• Development of new narratives (AI, GameFi, memecoins, DePIN)

In contrast, during a Bitcoin season, the situation is opposite: investors concentrate capital in Bitcoin as a more stable asset, Bitcoin dominance grows, and altcoins stagnate or decline in price.

Evolution of altseasons: from speculation to market maturity

Classic altseasons of 2017-2018 and 2021

End of 2017 — beginning of 2018: Bitcoin dominance fell from 87% to 32%, while the ICO boom led to a wave of new tokens. The total crypto market capitalization grew from $30 billion to $600 billion. However, repressive regulatory measures quickly ended this cycle.

Early 2021: Bitcoin dominance decreased from 70% to 38%, while the share of altcoins increased from 30% to 62%. This period was marked by explosive growth in DeFi, NFTs, and memecoins. Market capitalization reached record highs of $3 trillions by the end of the year.

Modern altseason: 2024 and beyond

The current cycle differs markedly from previous ones. If 2017-2018 and 2021 were driven by speculation and retail enthusiasm, the 2024-2025 altseason is forming under the influence of:

Institutional adoption: Approval of spot Bitcoin ETFs led to inflows of over 70 new funds, strengthening trust in the crypto market at the level of traditional finance.

Regulatory clarity: Favorable political environment in the USA has created expectations of pro-cryptocurrency regulation, contributing to the altseason.

Expansion of sectors: Unlike previous cycles, the current altseason covers many sectors:

• AI Coins: Tokens like Render (RNDR) and Akash Network (AKT) have grown by 1000%+
• GameFi: Platforms like ImmutableX (IMX) and Ronin (RON) attract gamers and investors
• Memecoins: Projects like DOGE, SHIB, PEPE have shown growth of 40%+
• Metaverse and Web3: The ecosystem develops in parallel

Phases of altseason: how liquidity circulates

Altseason unfolds in four predictable phases, helping traders position assets:

Phase 1 — Bitcoin dominance: Capital concentrates in BTC as a stable asset. Bitcoin dominance index rises, altcoin trading volumes decline. This is the best time to accumulate promising altcoins at low prices.

Phase 2 — Ethereum gains momentum: Liquidity begins shifting into Ethereum and DeFi projects. ETH/BTC ratio increases, activity in Layer-2 solutions grows. This signals market readiness for altseason.

Phase 3 — Rally of major altcoins: Attention shifts to tokens with established ecosystems (Solana, Cardano, Polygon). These projects show double-digit growth.

Phase 4 — Speculative peak: Bitcoin dominance drops below 40%, smaller altcoins and memecoins experience parabolic growth. This is the riskiest period, with high correction risks.

Key indicators of the start of altseason

1. Drop in Bitcoin dominance index

Historically, altseasons begin when Bitcoin dominance sharply falls below 50%. This indicator remains the most reliable signal of capital rotation from Bitcoin into altcoins. Constant monitoring of this indicator helps traders enter positions more accurately.

2. ETH/BTC ratio

Rising Ethereum-to-Bitcoin price ratio often precedes broader altcoin rallies. When Ethereum begins to outperform Bitcoin, it signals market readiness to recognize the value of alternative blockchains.

3. Altseason index

Tools like the Altseason Index from Blockchain Center quantitatively assess the performance of the top 50 altcoins relative to Bitcoin. A value above 75 indicates an active altseason. As of December 2024, the index is at 78.

4. Growth in volumes in altcoin-stablecoin pairs

An increase in trading of altcoins against stablecoins indicates genuine demand rather than just pair rotation. Strong growth in niche sectors (memecoins, AI tokens) often precedes a broader altseason.

5. Market sentiment

The transition of the fear and greed index from fear to greed (above 70 points) is a classic sign of a bullish market for altcoins. Social signals and hype in the community also play a significant role.

6. Stablecoin liquidity

Availability and trading volumes in stablecoin pairs (USDT, USDC) are critical for stimulating activity in the altcoin market. Growing liquidity facilitates entry and exit for investors, encouraging capital inflows.

Choosing promising altcoins for the next altseason

Determining which altcoins will be leaders in the next cycle requires a combined analysis:

Technological characteristics: Strong blockchain architecture, scalability, and security are key factors for project survival.

Ecosystem development: Projects with active development, growing dApps, and user base have better chances of growth. Solana, for example, recovered from the “dead chain” reputation thanks to ecosystem development in memecoins.

Sectoral trends: Next altseason tokens are often associated with current narratives: AI integration in blockchain, GameFi platforms, DePIN (decentralized physical infrastructure), Web3 innovations.

Regulatory stance: Tokens with clear legal positioning and positive regulatory prospects are safer. For example, anticipation of SEC review of XRP ETF could lead to increased interest in XRP.

Liquidity and volumes: Choose altcoins with sufficient trading volumes on major platforms. Low-liquidity projects are susceptible to manipulation.

Trading strategies during altseason

Fundamental analysis

Before investing in an altcoin, it is necessary to:

• Study the whitepaper (whitepaper) of the project
• Assess the development team and their track record
• Understand the token’s utility (utility)
• Check the project’s financial health (treasury, burn rate)

Do not invest in projects you do not understand.

Portfolio diversification

Distribute investments across different sectors and projects. A typical structure might look like:

• 40% — large-cap altcoins (Ethereum, Solana, Cardano)
• 40% — mid-cap projects with strong fundamentals
• 20% — high-risk speculative positions (memecoins, new projects)

Realistic expectations and risk management

Although altseason can be profitable, do not expect 100x returns. Remember the principles of risk management:

Set stop-loss orders: This helps limit losses if the position moves against you. For volatile altcoins, a stop-loss of 15-25% below entry point is recommended.

Take profits: Do not be greedy. A system of gradual profit-taking (for example, selling 50% of the position at 50% profit, the remaining 30% at 100% profit) allows you to preserve gains.

Proper risk-reward ratio: For every potential 1% loss, there should be a potential gain of at least 2-3%.

Gradual entry (DCA — Dollar Cost Averaging)

Instead of investing the entire amount at once, spread purchases over time. This reduces the risk of entering at peaks and averages the entry price. The method is especially effective in volatile markets.

Risks faced by altcoin traders

Extreme volatility

Altcoin prices are usually more volatile than Bitcoin. This can lead to significant losses in a short period. On illiquid markets, spreads between buy and sell prices can be substantial.

Hype and speculation

Excessive hype can artificially inflate prices, creating bubbles. When speculators start to exit positions, sharp declines are possible.

Fraud and “rug pulls”

This is one of the most dangerous risks. Developers may:

• Drain funds after raising capital (rug pull)
• Organize pump-and-dump schemes to manipulate prices
• Create fake projects to steal data

Avoid unknown projects without clear purpose and with low capitalization.

Regulatory risks

Unexpected regulatory decisions can lead to price drops. Examples:

• End of 2018, regulation of ICOs led to the collapse of hundreds of projects
• Strict guidelines for crypto exchanges in various countries created volatility
• Conversely, positive decisions (approval of Bitcoin ETF) supported the market

Impact of regulation on altseason dynamics

Regulatory decisions have a paradoxical effect on altseasons:

Positive regulation catalyzes growth: When jurisdictions provide clear legal frameworks or significant bodies (like SEC) express openness to innovation, investors gain confidence, which favors altcoins.

Negative regulation creates uncertainty: Strict measures or threats to ban certain tokens can quickly turn the market.

Current environment: As of late 2024, expectations of pro-cryptocurrency policies in the USA are a strong driver of optimism. Possible approval of XRP ETF, for example, could lead to a significant increase in interest in this and other traditionally regulated assets.

Conclusions and practical recommendations

Altseason is indeed an exciting opportunity to increase capital, but it requires a systematic approach and discipline.

Key principles for successful trading during altseason:

1. Research before investing: Understand the projects you buy
2. Diversify: Do not concentrate all capital in one asset
3. Manage risks: Use stop-loss, take profits, maintain a healthy risk-reward ratio
4. Stay informed: Monitor Bitcoin dominance index, ETH/BTC ratio, altseason index, and regulatory news
5. Avoid FOMO: Do not chase hype; enter logically and systematically
6. Be prepared for losses: Small losses are normal; managing them is crucial

The cryptocurrency market will continue to evolve, and understanding altseason mechanics remains a tool to maximize opportunities and minimize risks in this dynamic environment.