Signs of the old season
The simplest but most comprehensive definition:
Altseason is the flow of liquidity from BTC into altcoins. But I would add the phrase “in a growing market” to the definition.
Altseason when the market is falling. Is that possible?
The perennial market structure is such that apart from stablecoins, BTC is the safe haven coin in the crypto market. This means that when the market falls, investors prefer to ride out the fall in stablecoins and BTC, as these are the two assets that lose the least value, have the highest capitalisation and are the most reliable.
Hypothetically, we can assume the compromise of the BTC chain and further loss of confidence in BTC. Or some legislative measures regarding BTC (which will be excluded after the adoption of the ETF BTC). This will lead to a liquidity outflow from BTC, but not to an increase in altcoins, as people will simply run away from the cryptocurrency market and everything will fall.
Signs of altseasonThe Altcoin Index
The Altcoin Index
https://www.blockchaincenter.net/en/altcoin-season-index/
The altcoin index chart above is in rainbow colours. It shows the Altcoin Index c annualised returns. Obviously, according to this indicator, we are only at the beginning of the altseason.
The altseason index is defined as the percentage of coins in the top 50 by market cap that have seen a percentage increase over the last three months that exceeds the growth of BTC.
BTC dominance
BTC dominance drops sharply during the alt-season. This is the essence of the phenomenon as liquidity flows out of BTC and into altcoins.
But also importantly, we are not yet at the levels of BTC dominance where the alt season used to start. This could be explained by the fact that altcoins have become more important in the cryptocurrency world and we won’t reach those levels again, but it is possible that the market is indeed far from the point where the alt season started.
Stages of the old season
The influx of funds into BTC I would call the zero stage. When there is a strong inflow of funds into the main asset of the cryptocurrency market – bitcoin. We are seeing this now with the BTC ETF. After a significant break above the previous high, further growth slows down and even a pullback can begin.
Of course, what has happened in the past does not mean that it will happen now. But in the past, a pullback would be followed by a new round of growth in the BTC, sometimes ending with a touch of the previous high, sometimes just a slow growth without reaching the previous high. Then the second phase would come.
Growth of ETH vs. BTC
An early sign of the altcoin season is the growth of ETH/BTC. This was very evident in the first half of 2021. Here, liquidity is flowing into this second most popular asset, there are still a lot of conservative guys out there and they are getting super profitable. They are now steaking ETH with yields between 3% and 30% (with the advent of restakings and leveraged steaking).
A sign of the coming altcoin season has been the rise of ETH over the past few years. Many say that ETH is already off to a low start. But perhaps the ETH/BTC ratio will still fall to 2021 levels.
In any case, this is the earliest indicator and should be the first thing to focus on.
The criticism of this approach is that there are many blockchains on which smart contracts can be used and in which large investors invest, for example Solana or BNB, TON. And why exactly ETH will be an indicator.
But as long as Layer-2 has such influence, these arguments seem to be invalid.
Growth of top altcoins
The top 50 are showing strength first, with growth in BTC and ETH slowing down.
Last cycle most of the big tokens more than broke their absolute highs, but I am sceptical that XRP or ADA will do so this cycle. Then the entire top 100 starts to rise in double and triple digits.
A lot of the tokens that have shown highs in 2021 have had huge inflation and unlocks. Some projects have many times more tokens in circulation now than they did in 2021. So expecting ATH (absolute maximum) in such tokens is too naive.
And this is where the actual alt-season begins
The most innovative and cutting-edge areas, projects serving projects from the top 100 start to take off. Due to low capitalisation, you can sometimes see moves of 100% or more per day. DeFi took off in mid 2021, but then a real explosion of GameFi projects: SAND, MANA, GALA, AXS, etc.
The rise of shitcoins
Now meme-coins have changed the paradigm of what a chitcoin is. The power of tokens in 2024 is not measured by the business behind the token, it is measured by the size of the community and its buying power. This is the final stage, this is where tokens take off regardless of fundamentals.
At this point, the task is to find a token, which has not yet had time to enter the players with liquidity for the pump, and that it was not outright rubbish or even more scam. But there will be plenty of scam at this short stage.
Lastly, I am posting a chart of crypto market capitalisation excluding the top 10 coins. Quite an interesting chart.
Old season winners. The risks of the old season
Some altcoins will rise by tens of percent per day, showing absolute overbought conditions on all technical indicators. The strength and complexity of this phenomenon is precisely in the temporary paradigm shift: before, pampers and dumpers, alts went after BTC, grew with pullbacks where everyone was thrown out, but it will be different – for example, non-stop growth stronger than ever in the last 2 years, then a pullback where most of the players with shoulders get liquidated, and a sharp continuation of growth.
Short term Winners
In the short term, the biggest winners from the alt season among retail investors will be the fanatics who simply believed in the alt season, sat out the dips and bought alts.
But the irony is that these are the same people who sit with small cap tokens in a bear market and watch them get 90% cheaper, and if you look at their returns over 4-5 years, they don’t turn out to be that great. Some of them were buying tokens in 2022, and many alt coins won’t reach those prices at all.
Loyal alt holders share both the brightest victories and the bitter defeats with the projects in their portfolio, but not all tokens justify long-term accumulation, as inflation, unlocks, etc., will take their toll.
Risks of Old season
1️⃣ The main risk is that the Alt Season doesn’t happen at all. History doesn’t have to repeat itself. Several projects will get off the ground, BTC’s dominance will diminish, and the market will crash. And instead of spectacular growth due to a reallocation of funds from BTC to altcoins, there will be a slower fall of some altcoins than BTC.
2️⃣ Not what you have in your portfolio will grow, old tokens will show modest growth, but new projects will take off, certain industries will take off. Or you are sitting on too conservative coins: XRP, ADA, COMP, etc. And they grew by 20-30%, which is not what you expected.
3️⃣ FOMO and failed speculative attempts. What you have in your portfolio is growing at 10-15% and you see other tokens growing at 50% a day for the last week. And you move into the strongly growing tokens where you gradually start to stagnate or even fall, and explosive growth in the one you got out of.
4️⃣ Don’t lock in profits. I.e. sit through the whole alt season expecting 20x, but it only gave you 3-5x, and now prices are back to where you bought them. The old season is over.
5️⃣ It’s too late to buy. When everything is already up and you’re pretty sure, yes – it’s old season. The caveat is that this tactic can generate significant returns, but not Xs. And it’s a pretty good tactic not to wait for a miracle, but to act when the alt season is in full swing. But here our greed is playing a joke on us, and the profit of tens of per cent is not fixed.
6️⃣ Don’t buy anything before a pullback. Being overly cautious could let you down. Everything has taken off, you have realised that the time has come, you are waiting for at least one correction to buy lower and “ride it out”. But that’s what a lot of people want and a good price is not given.
7️⃣ Try to be the smartest and take a short on hayahs. It is important to note here – the strategy has its place and there will indeed be great prices to short. But there will be pumps in a flat market and they will almost always end with a strong dump and there yes, playing down is justified. But catching an old season high is a thankless job.
Many of those who will rush to short are not cold and calculating downgraders, they are people upset that they did not have time to jump on the train that gave many investors the Xs. They realise it’s too late and too risky to buy, and they want to get back in “despite”, as if to avenge the missed opportunity. “Far more money has been lost in anticipation of a correction than in the correction itself” – Peter Lynch
Basic task for the off-season: without excessive perfectionism, take as much profit as you can and exit without worrying about lost profits, because a few months after the off-season there will be no trace of regret.