Markets operate in a variety of ways. A single price and its movement contain an infinite number of variables, data, and information. When it comes to investing, there are a few things that investors look for at asset prices in an effort to predict the future direction of the market.
Investors hoping to beat the market can take heart from seasonality. “Sell in May and go away” is a well-known adage based on patterns that show stock markets underperform during the summer when traders are on vacation. “Santa Claus rally” traders also speculate on the stock market rising around Christmas and into early January based on this belief.
Precious metals investors can also see calendar effects. A study found that the gold market has an “autumn effect” and tends to rise in September and November. If seasonality exists in crypto, it’s hard to say because the technology is still young compared to more established forms of investing.
What Are “Seasons” In The Cryptosphere?
“Timing the market” and finding patterns and trends to guide investors’ entry and exit points is a perennial interest for investors, and crypto investors are no exception. Despite the lack of historical data, crypto investors have already predicted several “seasons.” This year’s “DeFi Summer” is one of the most well-known, as is the “Altcoin Winter.”
What Is An Altcoin Season?
The term “altcoins” refers to all cryptocurrencies other than bitcoin, including ether (ETH), XRP, Cardano (ADA), and dogecoin (DOGE). There are periods in the market where altcoins outperform bitcoin in terms of price for several weeks or months at a time.
When bitcoin’s price stalls after a significant rally, investors reallocate their profits to other coins, igniting a new bull market for alternative cryptocurrencies.
The Bitcoin Dominance Index chart, which shows how big a slice of Bitcoin’s total value (market capitalization) is compared to the rest of the crypto market, is the best way to identify an altcoin season.
For the sake of argument, let’s say the Bitcoin Dominance Index is 42. Bitcoin now accounts for 42% of the entire cryptocurrency market capitalization. A rise in the index indicates that Bitcoin is gaining market share over the other coins. A decline in the index, on the other hand, indicates the inverse. For several weeks or months, the market share of Bitcoin’s main competitor, ether, plummets sharply and steadily.
Is there a ‘right’ season to invest in cryptocurrency?
If we look for patterns and probabilities, we may be able to predict future price movements. Prices from 2009 and earlier are not as reliable as those from more recent years even though bitcoin has been around since 2009. This is due to the market’s infancy, which made it impossible to obtain accurate price data.
Bitcoin’s average monthly returns since 2011 show that the largest cryptocurrency performs better in some months than others. BTC tends to perform better in the spring and fall months.
In contrast to the summer months, when demand is lower, its price tends to remain at its current level for most of the year. In the past, the month of September has been a bad one for bitcoin, with prices falling by an average of 5%.
We have even fewer data points to work with when it comes to Ethereum. Since April 2016, the average monthly return of ETH has divided the year into two halves.
Ethereum’s strongest, double-digit average percentage gains occurred in April and May this year. After June and September, monthly returns are weaker in the second half of the year.
What Is The Reason For The Altcoin Season?
When the Altcoin season comes around, it’s impossible to say for sure what causes it. After a Bitcoin bull run, it is widely accepted that investors tend to sell some of their BTC to recoup their gains. The fact that they’re buying altcoins with some of the money they’ve made from selling BTC suggests that the value of those coins will rise as a result.
There may also be a correlation between this current Altcoin season and the Dogecoin and NFT crazes that have been going on for two months now. There isn’t a single event that can be attributed to the altcoin season, as you can see.
2022’s Most Popular Altcoins:
The following are the ten most popular altcoins according to CoinMarketCap rankings at the time of this writing:
- Ethereum (ETH)
- Cardano (ADA)
- Tether (USDT)
- Binance Coin (BNB)
- Solana (SOL)
- XRP (XRP)
- USD Coin (USDC)
- Polkadot (DOT)
- Dogecoin (DOGE).
Conclusion: The Right Time to Purchase Altcoins?
When it comes to buying or selling altcoins, there is no right or wrong time. Volatility in the cryptocurrency markets means we’ll never know exactly how long the altcoin season will last or when it will come to a conclusion.
This means that if you’re interested in investing in altcoins, you can keep an eye on their price movements. As a further option, you can also use technical analysis and other metrics to keep an eye on it.