Key Takeaways
What are the ingredients to make a true altcoin season?
A range-bound Bitcoin price action coupled with a rapid drop in Bitcoin Dominance would signal that an altseason was well underway.
How should traders and investors prepare for such a scenario?
By the time these signals come, it could be too late. The TOTAL3 making new highs meant that it might be prudent for investors to assume more risk, hoping for greater returns than even Bitcoin can provide.
The altcoin market could see a bullish boost in the coming weeks. The historically volatile month of September has been crossed relatively safely.
Now, Ethereum [ETH] was challenging the supply zone at $4.7k, and Bitcoin [BTC] set a new all-time high on Sunday, the 5th of October.
While the major crypto assets prepare to go into price discovery, what should the altcoins, large and small, expect?
In a post on X, crypto trader and analyst Mags revealed why they were selling a part of their Bitcoin holdings and rotating into altcoins.
Source: Blockchain Center
It boiled down to superior returns, even though altcoins tend to face greater volatility and hence represent more risk. The altcoin season index was near the 75 mark at press time.
This reflected a market on the precipice of an altseason, where BTC is outperformed by the wider market.
Times are tougher now, and only selective alts are likely to rally enormously. Conditions are much different now compared to 2017, when the handful of crypto tokens tended to explode higher together, a true altseason.
The analyst also noted that volume was coming back to altcoins, but saved the most important part for last.
Altcoins tend to go vertical when…
Capital rotation is a concept we shouldn’t forget. The higher BTC goes, the more profit the holders see, and the more FOMO sidelined or new participants feel.
After a point, BTC plateaus and moves sideways while altcoins, which struggled to keep pace, suddenly accelerate higher, spurred by new capital inflows.
A violent move upward is on the verge of unfolding. As analyst Jackis noted, a period of historically low BTC volatility was coming to an end.
This expansion could make a $140k target look small since the low volatility was on the monthly timeframe.
Source: BTC.D on TradingView
The Bitcoin Dominance had a freefall in 2021, from March to May, while Bitcoin traded between $50k and $60k. Admittedly, this is a relatively wide range. During this time, the BTC.D dropped from 62.9% to 40.87%.
Source: TOTAL3 on TradingView
The altcoin market cap (excluding ETH) more than doubled from $406.8 billion to $857 billion in two months. This highlights how a true altseason needs a range-bound BTC and free-falling BTC.D.
Another vital clue for altcoin investors was the new all-time high that TOTAL3 has formed recently. It showed that conditions were ripe for market participants to assume more risk and get paid handsomely for it.
Investors must not neglect to do their due diligence, and once a thesis is formed, conviction to hold and wait is equally vital.
