The cryptocurrency market is experiencing a drought which makes it difficult to attempt to invest. Most potential new investors therefore choose to look for clues that can guide their entry and exit from the market. These indices should allow them to maximize profits while reducing risk.
One of the most used methods in this sector is undoubtedly the season of alternative cryptocurrencies, known as altcoins. Recently, several indicators seem to suggest that this investment-friendly period may already be on the horizon.
How is the arrival of the altcoin season determined?
Since "altcoins" is a term used to refer to non-Bitcoin cryptocurrencies, it is quite obvious that their performance is directly related to that of BTC. Furthermore, since Bitcoin is the most valuable cryptocurrency in the cryptocurrency market, it is the foundation upon which any analysis is carried out.
Furthermore, the performance of Bitcoin (quotation BTC) in general in the market is largely what allows investors to determine when to invest in altcoins. In fact, while it is true that in normal times, once the price of BTC falls, altcoins tend to follow its movement, this is not always the case.
There are times when Bitcoin goes through consolidation phases, keeping its performance below that of other altcoins. The latter tend to recover and outperform Bitcoin. This brings the market to an altcoin season.
In clearer terms, for an altcoin season to be unanimously declared, at least 75% of the top 50 cryptocurrencies must outperform Bitcoin in a three-month (90-day) period. Note, however, that the cryptocurrencies examined do not include stablecoins and asset-linked cryptocurrencies.
What are the benefits of the arrival of the altcoin season?
It should be noted that the altcoin season refers to a phase in the market where altcoins outperform Bitcoin, it does not mean guaranteed profits. The market is still under pressure due to uncertainties such as volatility.
The reason this period is so good for investors is that it offers them the opportunity to diversify their portfolio. During the altcoin season, most investors choose to shift their capital from the poorly performing Bitcoin to other better performing assets.
To identify the effects of the altcoin season, just look at the dominance rate of the Bitcoin market. The latter has suffered a sharp decline in recent days, due to the willingness of many investors to move their capital to other cryptocurrencies. According to CoinMarketCap analysis, although Bitcoin still dominates the market, its dominance rate dropped to 39,3%.
However, despite the potential signs of an altcoin season, many investors prefer to be patient. They chose to place particular emphasis on the correct timing of market entry and exit during the period.
Indeed, past experience has already shown that a late entry or exit during the altcoin season could propagate risks on trading strategies.
The market has been in the middle of winter for a few months, but Bitcoin has always risen. It remains to be seen when this will happen in the coming months. However, Goldman Sachs reports that Bitcoin may continue to drop towards $ 12.000.
