Maximizing Your Crypto Gains: The Money Flows from Bitcoin to Altcoins (And It’s Seasonal!)
Bitcoin (BTC) and Ethereum (ETH) are two of the most well-known and widely traded cryptocurrencies in the world. While BTC remains the most dominant and valuable cryptocurrency, ETH has emerged as the leader among the so-called “altcoins” or alternative cryptocurrencies. One indicator that has gained significant attention in the cryptocurrency market is the relationship between BTC and ETH, with ETH often serving as a barometer for the wider altcoin market. Understanding this relationship between the two may result in the ability to front-run a subsequent altcoin run for massive gains. Let’s explore this idea a little more and I will attempt to explain how ETH got to where it is and why it can be used as an altcoin season indicator.
ETH’s position as the largest and most widely used altcoin is a result of several factors. First, ETH was the first blockchain to introduce smart contract functionality, which allows for the creation of decentralized applications (dApps) and the execution of programmable transactions. This innovation paved the way for a wide range of use cases beyond simple currency transactions, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and more.
In addition to its technical superiority, ETH has a large and active development community that is constantly innovating and building new applications on top of the platform. This has resulted in a diverse ecosystem of projects, ranging from small start-ups to large-scale enterprise solutions, all leveraging the power of ETH’s smart contract capabilities.
The importance of ETH in the wider cryptocurrency market is evident in the relationship between its price and the price of BTC. While BTC is still the dominant cryptocurrency by market capitalization, the price movements of ETH often have a significant impact on the wider altcoin market. This is because many altcoins are built on top of the ETH platform, or rely on ETH for liquidity and trading volume. Furthermore, Many traders are now aware of the market psychology that comes into play when ETH’s price starts to fluctuate. They know that when ETH is performing well, it often signals bullish sentiment for the altcoin market as a whole, leading to increased demand and higher prices for other altcoins.
The cryptocurrency market is highly interconnected, and the prices of different cryptocurrencies are often interdependent. This means that the price movements of one cryptocurrency can impact the prices of others, as well as the overall market sentiment. An example of this might be that Ripple wins in court case with SEC, it could trigger a bull run on XRP and the rest of the cypto market. Conversely, if Ripple looses it battle with the SEC, it could adversely affect the whole crypto economy.
As the largest and most widely used altcoin, ETH certainly plays a significant role in the wider altcoin market. When investors and traders are bullish on ETH, it can signal positive sentiment towards the altcoin market as a whole. This is primarily because many altcoins are built on top of the ETH platform, or rely on ETH for liquidity and trading volume. Additionally, when the price of ETH is rising, it can attract new investors and traders to the altcoin market, which can result in increased demand and higher prices for other altcoins.
On the other hand, a decline in the price of ETH can signal bearish sentiment, which could lead to a sell-off of other altcoins. This is because investors and traders may view the decline in ETH’s price as a sign of weakness in the wider altcoin market. As a result, many investors and traders use ETH as a benchmark for their altcoin investments, and closely monitor its price movements as an indicator of market sentiment and movements in the altcoin market. Armed with this knowledge alone, I’m strongly suggesting that anyone interested in making short to medium term trades or purchases monitor what season it is and at what point in the crypto cycle it is (more on the cycle in just a moment).
Overall, the close relationship between ETH and the wider altcoin market has made it a key indicator for market sentiment and movements. By closely monitoring the price movements of ETH, investors and traders can gain valuable insights into the state of the altcoin market and make informed investment decisions accordingly.
See the above chart live here: https://www.blockchaincenter.net/en/altcoin-season-index/
With all of this in mind, the concept of “Altcoin Season” has emerged as a way to describe periods of time when altcoins outperform Bitcoin. As you can clearly see from the chart above, it is at the time of this writing Bitcoin season. Some would understand this as the right time to be dollar-cost averaging (DCA) into altcoins. If you believe in the crypto cycles as I do and many others, that in itself could be working as sort of a self-fulling prophecy that its the way it will play out again... and again. Buy low and sell high my friends.
But what actually makes it altcoin season? According to the popular definition, if 75% of the top 50 coins (excluding stablecoins and asset-backed tokens) perform better than Bitcoin over the last season (90 days), then it is considered Altcoin Season. This can be interpreted that investors and traders are more bullish on altcoins than on Bitcoin, and that altcoins are likely to experience a period of sustained price growth.
As the cryptocurrency market continues to evolve, more traders and investors are monitoring the concept of Bitcoin Season and Altcoin Season. However, understanding the broader crypto cycle and the path to Altcoin Season requires a more in-depth analysis. Below is a popular chart that is often used as a reference to track this cycle, but it’s important to note that market movements may not always follow the chart exactly. Despite this, the chart provides an excellent overview and can be a useful tool for understanding the broader trends and dynamics of the cryptocurrency market.
When BTC experiences a significant price increase, it is common for money to flow into ETH shortly after. This trend is not unique to the current market cycle but has been observed in previous bull runs as well. The pattern typically begins with a BTC pump, followed by an overlap phase where money flows into ETH. During this phase, ETH struggles to keep up with BTC’s growth but eventually starts to outperform it. This marks the beginning of phase two, where ETH experiences a significant price surge and other large-cap altcoins begin to diversify.
While this pattern may seem like a predictable lenghtly cycle, it is important to note that it can occur on a condensed time frame. This means that the pattern can be observed over a period as short as a few weeks, as opposed to the several-year timeframe seen in previous bull runs. Notably, the psychology behind these trends remains the same.
Let me explain a little more. As BTC experiences price increases, retail investors begin to feel greedy and seek out other opportunities for profit. They often turn to ETH and other altcoins, believing that they will experience similar price surges. This behavior is representative of the participants that are typically active in the broader crypto market. Retail investors may rotate profits from large-cap altcoins into mid and small-cap altcoins, further diversifying their portfolios.
It remains to be seen whether this trend will continue in the current market cycle. If BTC continues to lead the rally, an “alt season” may not occur, and this pattern may be irrelevant (just saying, I doubt the notion that there will not be an altseason this time around). However, it is clear that the relationship between BTC and ETH has a significant impact on overall market sentiment and movement and will likely be the case for years to come bar the flippening or some other altcoin ursurping ETH etc. In crypto anything can happen. And by theway, there are so many people inquiring about Bitcoin right now, here is an easy to read pro-Bitcoin article that can show them the importance and of investing in Bitcoin: https://medium.com/@tokentrekker/bitcoin-is-easy-and-better-than-gold-334796875018
The Path to Altseason chart above lays out how Ethereum often goes back and forth with Bitcoin, but eventually starts to outperform it. This marks the beginning of what is referred to as phase two, where Ethereum starts running super hard and investors begin to diversify down to large cap altcoins.
This flow of funds raises the question of why it works the way it does. Essentially, many people who buy Bitcoin think of it from a retail perspective. They purchase it on exchanges, which offer a lot of other options, including alt pairs and the ability to trade Bitcoin into other altcoins. When Bitcoin starts to pump, psychology tells retail investors that they can make money in the crypto space. As Bitcoin continues to rise, investors begin to take profits and move them into Ethereum and other altcoins.
This natural progression of investors taking profits from Bitcoin and moving them into other altcoins is inherent to crypto participants as noted. In the last bull run, many investors rotated their profits from large cap altcoins into mid and small cap altcoins out of greed. This type of behavior can work in a bull market, as greed can be a powerful motivator for investors. However, it is essential not to play Hot Potato at the end of the bull run. In other words, you don’t want to get caught being dumped on by the big guys distributing on you.
As the world of cryptocurrency investment continues to evolve, it is becoming increasingly clear that having a deep understanding of the interplay between different digital assets is crucial for success. The relationship between Ethereum and Bitcoin is a prime example of this, with the flow of funds between these two assets having a significant impact on market dynamics. By recognizing the cyclical and seasonal trends of this flow of funds, investors can make more informed decisions about where to allocate their funds in order to achieve profitable gains. However, this discussion raises an important question: what other interplays between digital assets are currently being overlooked, and how might understanding these relationships lead to even greater returns? As the cryptocurrency market continues to mature, it will be fascinating to see how investors navigate these complex interplays and uncover new opportunities for growth. More to come on this, so subscribe and stay tuned.
If you want to see specifically where I believe the money will flow after ETH pumps a bit, click here. And did you know there is an important factor to consider even before we get into the fundamentals??? Click here to understand the role of faith/belief in exploring the broader crypto market for gains. Lastly, if you want a rudimentary view of fundamental analysis this article will be helpful to you: https://medium.com/@tokentrekker/unlocking-the-potential-a-guide-to-performing-fundamental-analysis-on-cryptocurrencies-with-the-5ffa338f710b
You can dollar-cost average into the best cryptos on Kucoin (my favorite exchange)! Here is the link:
https://www.kucoin.com/r/af/2KsRxuN
My blah blah blah disclaimer: I am not a financial advisor and cannot provide investment advice. Cryptocurrencies and investing in general involve risk, and individuals should conduct their own research and consider their personal financial situation before making any investment decisions.
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