When it comes to cryptocurrencies, Bitcoin drives the crypto market. When a trader or investor thinks about cryptocurrency, the first cryptocurrency that likely comes to their mind is Bitcoin. However, this powerful digital currency is not the only cryptocurrency in the market. There are several others, but they are far behind Bitcoin when it comes to market value. No doubt, other cryptocurrencies are also flourishing like crazy, but these are always considered to be alternatives to bitcoin and are thus, also known as altcoins.
Now that the Bitcoin price is hiking again, experts, traders, and investors are expecting another alt season. If you have just stepped into the crypto world, you may not be aware of the term alt season. But, you need not worry as this article is specifically crafted to help you become familiar with the alt season.
The World Of Cryptocurrency
Do you know that there are almost 4000 cryptocurrencies in the world right now? Yes, and this huge world of cryptocurrencies is divided into two coin types. On the one side is Bitcoin, and on the other side, are the alternative coins. Every other coin apart from Bitcoin is an alternative coin. Bitcoin has always been the favorite cryptocurrency of investors but the altcoins’ popularity is also growing day by day and they are giving Bitcoin tough competition.
Different Types of Alt Coins
As stated above, there are more than 4000 cryptocurrencies in the market, but you probably have heard the names of only a handful of them. Several crypto projects are running; some have got their fair share of attention, some are skyrocketing, while others are just scams.
These numerous altcoins which are available in the market are not the same, and there are different types of altcoins that are:
A stablecoin is something whose value is stable and is free of the usual volatility of the crypto world. Some of the most popular stablecoins include Tether, USD Coin, and True USD.
2. DeFi Tokens
DeFi is the acronym for Decentralized Finance. It refers to using traditional banking tools on a blockchain Technology, e.g. Uniswap, Chainlink, Wrapped Bitcoin, etc.
3. Utility Tokens
It can be understood as the right to use the company’s products or services against the money provided for these tokens, e.g. Cardano, Polkadot, Binance Coin, Bitcoin Cash, etc.
4. Security Tokens
These are digital contracts that give you the right to a physical asset or stock, e.g. Pantera Capital, Bruce Gibney, etc.
Not every cryptocurrency that enters the market is the same as others and not every cryptocurrency is surely going to have a bright future like Ethereum, Tether, or Binance Coin. Why? Because the market is volatile, and people are still skeptical of using these digital currencies. One more reason is that there are also shitcoins that are scams known for breaking the trust of investors.
Now, you know what altcoins are, let’s talk about alt season.
What is Altcoin Season?
The most popular cryptocurrency in the market is Bitcoin followed by Ethereum, but the difference between their prices and market cap is huge. As Bitcoin rules the crypto market, it impacts all the other currencies.
An Altcoin season is a period when the altcoins grow faster than the Bitcoin. It means that people are investing more in altcoins and withdrawing money from Bitcoin. Now you must be thinking that Bitcoin is trading at $60,000; why would someone withdraw money?
The exact reason for the withdrawal is that bitcoin’s price is rising abruptly. If you are an investor, then you must understand that prices may fall at the same speed as they rise. In a volatile market like cryptos, it is quite possible to witness a sudden downfall of the market. Only a week ago, Bitcoin was $50,000, and as of writing this article, it is trading at $60,780. The speed at which bitcoin is growing is quite high.
The prices rise due to the halving event that results in the number of bitcoin rewards for miners becoming half. The miners are nodes that build the block by storing the transactions and exchanges. In the past, Bitcoin prices have grown at a great speed. The prices keep increasing, and the investors start cashing out.
Why? An example will be helpful here. You bought a share of $1. It is a nominal investment. Now the share is trading at $500. What would a sane person do? They know they are on a $499 profit. They will cash it out before the prices fall.
This is what happens when Bitcoin prices rise at such a speed that no one exactly knows what the limit would be. During an alt season, investors start cashing out and start investing in altcoins. Thus, altcoins price starts rising, and this may last for a week, a fortnight, a month, or a maximum of two months until the Bitcoin price falls and comes down to its base price or even lower.
Another reason why people start exchanging Bitcoin in such a situation, when the price is falling, is the exchange fees. The bigger is the transaction, the higher will be the withdrawal fee. No one wants to give away their profits for fees. So, they exchange it with altcoins.
An alt season requires a lot of attention. You cannot just invest in an altcoin and wait for the season to end. You buy it, make profits, and sell it if you do not intend to hold it for a long period. During the heat, take advantage. That’s an ideal strategy.
How to Know If It’s Alt Season?
The best thing about the crypto world is that people talk about it openly. Traders, investors, and experts talk about what’s happening in the crypto market, and you can always stay updated about the latest news. However, if you want to guess when the next alt season is going to occur, you need to look for some signs that are discussed ahead.
The Bitcoin Dominance trend is the most talked about when it comes to alt season. Bitcoin Dominance is a simple term that means the share of Bitcoin in the overall cryptocurrency market cap, i.e. the number of Bitcoin holders in the crypto market. If more and more people are buying Bitcoin, it will increase the price of bitcoin, and altcoin prices will fall.
What you have to look for is a situation when the situation is quite the reverse. When more and more people are selling Bitcoin, this is a good indication of alt season. It means people are possibly cashing out their investments in Bitcoin, and investing in altcoins. The best alt season until now is considered to be the one that occurred in 2017.
Trading platforms like Robinhood and Revolut are the best platforms for newbies. You can stay updated about the alt season as these platforms start making announcements.
Altcoin Season Index keeps an eye on the alt season and informs you if you should be ready to exchange your BTC for altcoins.
Remember, being a new investor, it is difficult to predict an alt season. The prices of Bitcoin are surging right now, and even though Bitcoin is predicted to touch $1,00,000 or even higher in the coming years, market experts are predicting an altcoin season in 2021.
How To Deal With Alt Season?
If you are ready and alt season knocks on your investment door, you need to snatch the opportunity for making significant profits. If you are a beginner, platforms such as Robinhood and Revolut can be very helpful. You can buy an altcoin as their prices start to increase, and when you see the end of the alt season, you cash it out. Being a Bitcoin holder, you can exchange your BTC during peak time with altcoins and make a lucrative profit. As the value of BTC falls, you can exchange your altcoins with BTC that are available at lower prices.
Best Alt Coins To Buy In 2021
Well, if the alt season comes as it has been predicted, you must know the altcoins that are worth buying. Here are some of those:
Being the second-largest cryptocurrency in terms of market capitalization, Ether is the crypto developed by Ethereum, which is a smart contract platform that allows the development of decentralized apps on its blockchain. The DeFi tokens, which are so popular in the market, are also built on the Ethereum blockchain. Ether is rising at a fast pace and has already crossed the $1800 mark. The future is bright, and you can choose it against Bitcoin in the next alt season.
Known for its advanced technology, Cardano is an open-source project that uses smart contracts. Its cryptocurrency, ADA, is climbing the CoinMarketCap table fast. It is at the 5th spot and is growing fast. Buying this crypto coin this alt season can be very beneficial because it has a low market value right now, but holds an impressive potential to grow.
Launched in 2014, this crypto is widely known for making cross-border transactions fast, easy, and affordable. Its transaction fee is fixed at 0.00001 XLM, where XLM is the crypto of Stellar. With its partnership with various governments and institutions, its prices are skyrocketing, and it is all set to help you make good profits if you buy it in the next alt season.
UNI is the cryptocurrency of Uniswap. It is popular for its peer-to-peer transaction facility that eliminates intermediaries. It is backed by the Ethereum blockchain’s smart contracts. If you hold UNI, you get the right to vote on prospective changes to be made in the system as it is a decentralized exchange. It has emerged as a strong player in the crypto market after the September 2020 crash.
You may know it by the name LINK as it is the actual name of the cryptocurrency. Its potential can be understood from the fact that it went from $1 to $23 in the year 2020. It runs on different blockchains, which makes it one of its kind in the crypto world. If investors are looking for a good return, Chain Link can be a great option.
Will There Be An Alt Season in 2021?
The biggest indicator of an alt season is the rising Bitcoin prices. The prices of other altcoins are increasing, and the crypto market is on boom in 2021. Looking at Bitcoin prices, it can be said that alt season is around the corner. All you need to do is stay updated and keep your eyes open for any relevant news that may indicate the occurrence of the alt season.
Being an investor, you must stay updated about the market trends and the latest news. It is always advisable to make a diversified portfolio so that you weigh your risks and rewards and make important decisions. The best way to make profits in a crypto market is to own the ten best cryptocurrencies and balance your returns. If you are a new investor, look at the market trends, keep educating yourself and make some good profits this alt season.