A new alt season is here — at least, according to some crypto industry commentators. Over the last month, altcoins — aka cryptocurrencies that aren’t Bitcoin (BTC) — have surged in price, with projects such as Solana, Cardano and Polkadot seeing their tokens triple in value. However, though people are screaming “alt season” with an air of familiarity, the industry is still very much exploring uncharted territory.
The Cointelegraph Markets Pro alt season indicator states that the industry is in the midst of an alt season, showing a 32% inclination. While The Altseason Index, which defines the alt season as a period of 90 days where 75% of the top 50 altcoins outperform Bitcoin, says it isn’t an alt season just yet. But if the last few weeks are anything to go by, the altcoin market is just getting started, and it’s already proving its desire to impress.
One theory behind why an alt season is imminent is that the general sentiment around Bitcoin has reached a solid footing. Outflows from Bitcoin are funding more altcoin projects, resulting in newly launched tokens reporting impressive growth. However, could there be much more to the story than that?
Wen alt season?
Alt seasons can be both good and bad for the crypto economy, being a sort of necessary evil in the space. On the one hand, they are a sign of health, indicating new money flows into the market and causing valuations to surge. However, after a while, speculation tends to outpace the utility of these tokens, causing steep market corrections and immense losses for speculators.
Over the last few years, the cryptocurrency and digital assets space has grown drastically, but according to Hunain Naseer, senior analyst at OKEx Insights, not much is new this time around. “We’re witnessing Ethereum breaking out against BTC and starting to outperform the market leader. The same happened in previous alt seasons,” he said, adding, “ETH is leading a market-wide surge, and as long as it remains strong, the trend can continue till the end of the year.
According to Naseer, the recent altcoin rally is being fuelled by myriad factors, including the recent nonfungible token boom (especially in August), which reaffirmed the market’s belief in the speculative value of digital assets. The recent gust of positive news has also generated renewed market optimism, with announcements for Ethereum’s London hard fork, the launch of smart contracts on Cardano, and cross-chain bridges on Cosmos.
The shift from the more traditional “blue chip” investments in the space like Bitcoin and Ethereum could also reflect the market’s current risk-on sentiment, meaning investors are increasing their risk tolerance due to a more buoyant market outlook. Altcoins are naturally more volatile than Bitcoin owing to their smaller market capitalizations and lower liquidity, but while this means they can quite quickly render investments worthless, they also have the potential for enormous gains.
The stablecoin market capitalization has grown from $36 billion in January to over $115 billion in mid-September, with Tether’s (USDT) supply tripling over the period. Stablecoins, though not exactly altcoins, have become the primary means of value transfer on blockchain networks, and this expansion is a decent representation of decentralized finance’s (DeFi) growing influence on the space.
A well-diversified portfolio can protect investors from risk while ensuring they get in on some of the rallying action. This makes altcoins as a whole rather attractive as an investment class, but all this money has to come from somewhere. With flows into altcoins on the rise, a major BTC sell-off might be in the cards, but institutions seem to be more bullish about Bitcoin than ever before.
According to Rachel Lin, co-founder and CEO of decentralized derivatives exchange SynFutures, Bitcoin isn’t going to crash — it’s just lagging in performance: “I expect the general crypto market to…