Written by Zohaab Ishrat
Has the altcoin season resurfaced once again? As altcoins try to have a lasting impact on the blockchain market, the increasingly positive outlook upon them may push the crypto market in a risky direction.
Altcoin seasons have already had a promising effect on blockchain technology; they can occur from once every three years, to once a year, to as frequently as once every 3 or 4 months. (Source Businessinsider); during these time periods, altcoins – excluding Bitcoins (BTC) — have risen in value, with ventures including Solana, Polkadot, and Cardano seeing their tokens tripling in value. However, miners are shouting “alt season” with an air of caution, as the cryptocurrencies explore an unfamiliar space.
Figure 1: https://www.blockchaincenter.net/altcoin-season-index/
Is There Inclination or Disinclination within the Altcoins market?
The blockchain is in the middle of the alternating season, with a decline of 32%. According to industry insiders, the all-season index states that the last altcoin season lasted 90 days and during which, 75% of the top 50 altcoins outperformed Bitcoin (though this performance was in terms of growth, not market value).
However, given that the growth of altcoins is unpredictable, we cannot say for sure whether the tides have truly shifted in favor of altcoins. Even so, if we ignore the data from the past few weeks, we can see that the market has already started to observe an upwards trend for altcoins and that the market has already proven its willingness to bring about a change in favor of altcoins.
Figure 2: https://www.blockchaincenter.net/altcoin-season-index/
Bitcoin does still act as a basis for fluctuation in the crypto industry; and the outflow of Bitcoin has provided funding for more altcoin assignments, leading to impressive growth in newly-launched tokens. However, could there be more to this story?
The Impacts of Alt Seasons: Good or Bad?
Despite all the good, altcoin seasons also bring with them some uncertainty that in the long run, can be dangerous for the blockchain financial system. On the one hand, altcoins represent change and development, indicating that new cash is flowing into the industry and that the industry is advancing; yet on the other, after a period of time, we sometimes see sharp market adjustments as the altcoins fail to keep up with their initial performance rate, resulting in huge financial losses for investors, as the value of the altcoin declines after the season. Ultimately, the system will balance itself out in the end, and the altcoins will become dormant again until the next season.
Figure 3: https://cdn-blog.scorum.com/production/pete/9249561867821986_500
Abandoning additional, conventional “blue chip” funds (tokens or funds that have proven strong financials and steady returns over the long-term) in houses such as Ethereum or Bitcoin can only additionally reflect the current attitudes towards market risk, as buyers have decided to take their chances with more risks, based on particularly good market prospects. Due to their lower market capitalization and lower liquidity, altcoins are certainly riskier than Bitcoin.
In January, the collective market value of the stable coins rose from 36 billion USD, to more than 115 billion USD, and by mid-September, the value of Tether (USDT) had tripled. Although stable coins are no longer altcoins, they have changed the main method of altering their value in blockchain networks. This growth is a good example of the increasing impact of decentralized finance (DeFi) on the global economy.
This season is the dominant season for ETH. At the beginning of this year, Bitcoin accounted for nearly 70% of the market value for cryptocurrencies, while Ethereum accounted for no more than 13%. Currently, Ethereum accounts for nearly 19% of market value, whilst that of Bitcoin has fallen below 41%.
Figure 4: https://pbs.twimg.com/media/EfomDBqWoAAjzYz.jpg
DeFi Projects On-The-Go
Many DeFi projects are running on the Ethereum network, and as competition intensifies, it doesn’t seem like it’s going to lose momentum anytime soon. The altcoin market has grown from 220 billion USD to 1.35 trillion USD this year alone — an increase of about 600% in just 9 months — and Ethereum has played an important role in this. Some people no longer even consider ETH as an altcoin, which begs the question: once other altcoins exceed a certain threshold of value and utility, will they eventually abandon this label?
Exceeding this threshold will make ETH a true competitor for the top spot; investors will speculate that ETH has a milder inflation curve and a sturdier ecosystem, which would make it a benchmark asset for other altcoins.
Alt Season Outlook
As people all over the world learn more about cryptocurrency and its capability to solve worldwide problems such as remittance and currency efficiency, more and more funds are being poured into digital assets.
According to Raymond Hsu, CEO and co-founder of Cabital, institutional investors will most likely initially invest in Bitcoin and then move to Ethereum, just as a retail investor would.
“After they become comfortable, they will begin looking into other projects that are tackling the more intricate challenges”
Figure 5: https://steemitimages.com/DQmdjyb47VEAwF3Xdp7DQkSswvVrmCuHycf3i8r9pC3RRh4/IMG_20180325_032449_485.JPG
The jury is not yet out on whether there will be an altcoin season, but observations of the market found that it is very likely that there will be another alt season soon – though how soon, we can’t say. Similarly, events, risk-free news, and innovations linked to the altcoin market will become regular trends in the blockchain market. But for now, let’s cross our fingers and hope for the best.