Decoding Altcoin Season: Insights into the Next Altseason Chart from Liquidity Flows

Have you been immersed in the crypto world for many years? If so, the concept of “cryptocurrency market cyclicality” should be familiar. When Bitcoin repeatedly oscillates within a set range, traders start to get restless—this could be a signal that funds are about to rotate into altcoins, commonly known as “altseason.” The last peak of an altseason occurred in early 2021, and now many traders are looking forward to a cycle where altcoin indices surpass Bitcoin and Ethereum exponentially. Want to gain a deeper understanding of this cyclical phenomenon? From capital flow trajectories to practical trading advice, this article will fully explain the origins and developments of altcoin season.

Quick Core Overview

• Altcoin season refers to periods when cryptocurrencies other than Bitcoin receive significant attention and price increases
• Features of Altseason include declining Bitcoin dominance, surging altcoin trading volume, and social media buzz
• Historical patterns generally follow: Bitcoin leads → Ethereum rises → large-cap altcoins climb → small-cap coins explode
• Preparation strategies include diversified portfolios, technical analysis for entry/exit points, risk management, and market trend tracking
• Common pitfalls include chasing hype, ignoring macro factors, over-leverage, and not taking profits timely

What is Altcoin Season?

Altcoin season is the period when market focus shifts from Bitcoin to other crypto assets. During this phase, cryptocurrencies besides Bitcoin experience noticeable price surges, often far exceeding Bitcoin’s gains. This shift is usually accompanied by heightened enthusiasm for altcoins and a decrease in Bitcoin’s market share.

The emergence of altseason typically reflects optimistic market sentiment and an expanding crypto ecosystem attracting more participants. A wave of optimism pushes the market to new highs, enticing both veteran traders and newcomers.

Evolution of the Altcoin Season

The 2017 ICO boom was one of the earliest altseasons. Back then, projects like Ethereum ($3.32K), Ripple ($2.09), and Litecoin ($72.47) gained prominence with innovative use cases. The market atmosphere peaked, but bubbles inflated as well. By 2018, regulatory pressures and project failures caused the cycle to collapse.

The 2020-2021 DeFi wave marked the second major altseason. Projects like Uniswap ($5.38), Sandbox ($0.12), and Solana ($143.12) soared again, driven by DeFi, metaverse, and NFT concepts. However, as macro conditions cooled in 2022 (rising interest rates, gloomy economic outlook), these altcoins also retraced sharply.

All these altseasons follow a pattern: innovation-driven rallies are often followed by sharp corrections, with the market swinging between speculative fervor and real value. This cyclical capital flow is key to understanding crypto markets.

Liquidity Flows in the Crypto Market

Liquidity flow describes how capital moves among different assets in the crypto market. Think of it as a domino chain: funds enter and then sequentially shift from Bitcoin to Ethereum, large-cap altcoins, and small-cap tokens. Mastering this pattern allows traders to position themselves accurately at different stages.

Bitcoin is the core of liquidity flow. Funds start with BTC, then rotate to ETH, large-cap coins, and small-cap tokens, aiming for higher returns through this rotation.

Why Liquidity Flows Matter

Understanding how capital moves is crucial for spotting trading opportunities. Each phase of the liquidity cycle carries distinct risk-reward profiles.

Predicting future flows enables traders to position early. For example, if funds are about to shift from Bitcoin to Ethereum, early ETH positions can capture the upcoming rally.

Avoiding holding risks is also vital. Knowing when funds will exit small-cap tokens and return to Bitcoin helps prevent losses during downturns.

Managing volatility risk is equally important. As funds flow into small-cap assets, volatility increases. Savvy traders can diversify or even exploit high volatility for arbitrage.

The Four Stages of Altseason Capital Rotation Chart

Since January 2021, the “altseason chart” has vividly depicted four stages of capital flow in the crypto market. Each stage builds momentum for the next, culminating in the altseason frenzy.

Stage 1: Bitcoin Dominance

What happens: Capital first floods into Bitcoin. Traders value its stability and status as the largest market cap coin. In volatile markets, Bitcoin acts as a “safe haven.” Institutional investors often allocate to BTC first, reinforcing its dominance.

Key signals: Bitcoin dominance rises, while altcoins lag behind. Trading volume concentrates in Bitcoin, and market funds gather around the leader. This stage often signals that broader market activity is imminent.

Current data reference: Bitcoin price $96.41K, 24h change -0.81%, market cap $1.93T

Stage 2: Ethereum Emerges

What happens: As Bitcoin’s momentum slows, traders turn their attention to Ethereum. This shift stems from optimism about Ethereum’s ecosystem—ranging from established DEXs like Uniswap to new DeFi projects like Ethena ($0.23)—drawing capital inflows.

Key signals: ETH outperforms Bitcoin significantly, with its market share increasing. This indicates market interest shifting from “digital gold” to more application-driven assets.

Current data reference: Ethereum price $3.32K, 24h change -1.13%, market cap $400.78B

Stage 3: Large-Cap Altcoins Rise

What happens: After Ethereum’s steady growth, focus shifts to a set of large-cap altcoins with solid user bases and mature communities. Some are linked to emerging narratives like AI or Layer-1 competitors, gaining sudden momentum.

Key signals: Large-cap altcoins frequently see double-digit gains, while Bitcoin and Ethereum trading activity wanes. Funds are spreading into a broader market.

Stage 4: Altseason Explodes

What happens: This is the cycle’s climax. Capital floods into small and micro-cap tokens, meme coins, and niche projects. The market is rife with frenzy, social media discussions explode, and retail investors rush in, driven by FOMO.

Key signals: Bitcoin’s dominance sharply drops below 40%. Small-cap tokens soar, often hitting new all-time highs. Google search trends and social mentions skyrocket.

Recognizing the Precursor to Altseason: Six Key Indicators

To anticipate altseason, focus on key signals that can give early warnings and allow pre-positioning before large capital inflows.

1. Bitcoin Dominance (BTC Dominance)

Bitcoin dominance reflects its market cap share. When this steadily declines, it suggests funds are leaving BTC for altcoins. Historically, when dominance drops below 40%, altseason is underway. If Bitcoin price stagnates or declines simultaneously, this confirmation strengthens.

2. Altseason Index

Some market analysis tools aggregate altcoin performance relative to Bitcoin. When this index exceeds 75, most top altcoins are outperforming Bitcoin, indicating altseason.

3. Market Sentiment

Sentiment is critical. Major positive news (partnerships, upgrades, new launches) can trigger optimism. Trading volume surges, and prices follow. Watch sentiment indicators and exchange volume changes. When fear or neutrality shifts to greed, altseason is near.

4. Social Media Buzz

Discussions about altcoins on Twitter, Reddit, Telegram surge, with trending hashtags and viral posts. When niche coins get retweeted by influencers, it signals the start of altseason.

5. Trading Volume Divergence

Near altseason, altcoins’ trading volumes on major exchanges disproportionately surpass Bitcoin’s. This reflects heightened trader enthusiasm for altcoins.

6. ETH/BTC Ratio

Ethereum often acts as a barometer for altcoin markets. When ETH/BTC continues rising, it indicates Ethereum is surpassing Bitcoin, often foreshadowing a broad altcoin rally.

Monitoring these indicators closely helps traders pre-position, capturing gains and managing risks effectively.

Common Mistakes During Altseason

While altseason offers opportunities, it also carries risks. Many traders fall into traps, leading to significant losses. Discipline, preparation, and market awareness are essential to avoid pitfalls.

1. Blindly chasing hype

FOMO during altseason can cause impulsive buys without proper analysis. Some coins surge purely on hype without fundamentals, resulting in losses when the hype fades.

Countermeasure: Develop a trading plan, prioritize projects with real utility and active teams. Use technical tools to set rational entry/exit points, avoiding emotional decisions.

2. Ignoring macro factors

Altcoin prices are influenced by macroeconomic conditions—interest rates, regulations, global economy. Ignoring these can lead to misjudgments.

Countermeasure: Keep abreast of macroeconomic news, central bank statements, regulatory updates. This helps in assessing the overall market direction.

3. Over-leverage

The lure of high returns during altseason tempts traders to leverage up. But high leverage amplifies losses, and a sudden downturn can trigger margin calls and wipe out gains.

Countermeasure: Use leverage cautiously, set stop-loss orders, and manage positions prudently. Only trade with funds you can afford to lose.

4. Holding positions too long without taking profits

Greed can cause traders to hold on expecting bigger gains, only to see the market turn. Altseason rallies are often intense but short-lived, followed by sharp corrections.

Countermeasure: Predefine profit targets and stick to them. Consider partial profit-taking to lock in gains while leaving some exposure for further upside.

Preparing for Altseason: Four Action Plans

To profit from altseason and safeguard assets, a systematic approach and clear mindset are necessary. Here are practical steps.

1. Diversify across different sectors

Funds flow rapidly during altseason, with hot sectors like DeFi, Layer-1, AI gaining prominence. Balanced allocation across themes reduces risk and captures multiple opportunities.

Practical tip: Research emerging trends and social media buzz, identify high-interest sectors. Balance large-cap coins with promising small-cap projects.

2. Use technical analysis for precise entries/exits

In volatile markets, timing is everything. Entering too early risks being caught in dips; too late, chasing highs. Technical tools help identify optimal points.

Tools include:

• Fibonacci retracement: Find support/resistance levels during dips
• Moving averages: Combine short and long-term MA to spot trend changes
• RSI (Relative Strength Index): Detect overbought/oversold conditions

Combine these with realistic targets and disciplined execution to avoid FOMO-driven mistakes.

3. Establish strong risk management

Altseason is the most frenetic phase. Without risk controls, a sudden drop can wipe out gains.

Risk management essentials:

• Stop-loss orders: Set at predefined levels to limit downside
• Position sizing: Allocate small portions to high-risk tokens; keep core holdings in stable assets
• Partial profits: Sell in stages as prices rise, locking profits and maintaining upside potential

4. Stay market-sensitive

Crypto markets change rapidly. Today’s hot asset may cool tomorrow. Staying updated with news and trends is vital.

Information sources:

• Regularly check crypto news and project updates
• Join Discord or Telegram communities for real-time discussions
• Subscribe to professional analysis platforms
• Quickly adapt strategies when new hot topics emerge

Combining diversification, precise timing, risk controls, and market awareness enables you to seize opportunities during altseason while protecting your capital.

Final Words and Next Steps

Altcoin season is one of the most exciting phases in crypto, offering substantial gains for savvy traders. Understanding liquidity rotation, mastering the four stages of the altseason chart, and applying reliable tools and strategies will prepare you well.

Ready to start trading? Gate.io offers various trading options for users of all experience levels. Whether you prefer manual spot trading, crypto options for hedging, or automated trading bots, Gate.io can meet your needs.

FAQs

What is liquidity flow in the crypto market, and why is it important?
Liquidity flow refers to how capital moves across assets. Understanding it helps predict which assets will rise or fall during different cycles, optimizing trading decisions.

How to tell if Altseason is about to start?
Key signals include declining Bitcoin dominance, surging altcoin trading volume, and rising Altseason Index. Increased social media chatter about altcoins is also a sign.

How is the Altseason Index calculated?
It compares the performance of top altcoins relative to Bitcoin. When the index exceeds 75, it indicates strong altcoin momentum and an ongoing altseason.

What are the risks of trading during Altseason?
High volatility can lead to rapid gains but also swift losses. Without proper risk management, traders can suffer significant setbacks.

Which tools can track liquidity flows?
Platforms like TradingView and on-chain data analysis tools provide real-time data on market sentiment, trading volume, and key indicators to monitor liquidity movements.