The year 2020 started exceptionally for cryptocurrencies, especially altcoins. We had several cases of increases above 100% in the period, as shown in the table below with data from February 18.
But, after all, what constitutes an “altcoin season”?
Well, this time it's pretty clear, as all the top 20 currencies in the ranking are performing better than Bitcoin.
Not always so easy, as it is quite common to see Ethereum (ETH), Ripple (XRP), Stellar (XLM) and exchange tokens falling behind even during an altcoin rally.
Why does it happen?
These projects have a slightly different dynamic, whether directed towards the growth of smart contracts and decentralized applications or specific niches, for example, international remittances.
Likewise, exchange tokens are usually tied to volume growth, new product launches, etc. There is no such direct relationship with the price of other currencies.
How to determine more clearly?
The safest way to confirm the start of the rally is to follow the dominance of Bitcoin, that is, the total market value of BTC among the total cryptocurrencies listed.
Note that after a long season at around 69%, this figure dropped rapidly throughout 2020. This is the definitive sign you are looking for, a sensitive drop that lasts more than three or four days.
Can you still ride the wave?
This question is impossible to answer, but there are some signs that you can look for to know if it is time to leave the boat:
- Keep an eye on the three currencies that rose the most in the period, in this case, BitCash SV (BSV), Tezos (XTZ) and LINK
- These currencies tend to anticipate the downward movement, as this is where investors are making the biggest gains
- If all three fall more than 6% or 7% on the day, run away. Zero your positions and wait for a new entry.
Which coins should I buy during the rally?
Give preference to the highest bullish currencies in the last 7 days. On the websites Coinlib, Nomics and CoinGecko it is possible to order this easily.
Remember that we are operating in favor of the trend, so there is no reason to try to find out what the next pump will be.
Another reason to pick up the coins that performed the best is to avoid encountering new “selling waves”. A lot of people do not leave the coins stopped at the exchange, but when they see a 10% performance on the day they rush to transfer.
Remember to start by looking at the macro scenario, that is, the dominance graph, to decide if we are still (or not) in an “Altcoin Season”. Only then spend time analyzing if there is still time to enter and which coins you should buy.
About the author
Marcel Pechman served as a trader for 18 years at UBS, Deutsche and Safra. Since May 2017, he has been doing arbitrage and trading in cryptocurrencies, as well as co-founder of the cryptocurrency analysis website RadarBTC.