What is Altseason: From Market Rotation to Mechanism Evolution

The cryptocurrency market is like the tide, with rises and falls. Among the most notable phenomena is the so-called “altseason” — a cyclical event that is crucial for investors seeking returns outside of Bitcoin.

Since mid-2024, the entire crypto ecosystem has undergone profound changes. Factors such as stablecoin liquidity, influx of institutional capital, and improved regulatory environment have reshaped the logic of altseason. With major events like the positive stance of the Trump administration towards cryptocurrencies, the completion of Bitcoin halving, and the approval of spot ETFs, industry insiders generally believe that the next wave of altseason is just around the corner.

The Essence of Altseason: More Than Price Rotation

What is Altseason?

Altseason refers to the period when the total market capitalization of alternative coins (all cryptocurrencies except Bitcoin) surpasses that of Bitcoin. More precisely, it is a cycle where market attention shifts from Bitcoin to other coins, often accompanied by significant price increases and trading volume surges.

Unlike early cycles, today’s altseason has moved beyond simple “funds rotation.” Previously, investors would transfer funds into altcoins during Bitcoin sideways movement. Now, the driving forces have fundamentally changed — expanded liquidity in stablecoin trading pairs (like USDT/USDC), large-scale institutional entry, and the maturing retail market are the new catalysts. This means altseason is no longer just speculation but reflects the broader migration of the crypto market from niche to mainstream.

Altseason vs. Bitcoin Dominance Period

These two phases contrast sharply:

During altseason, market focus shifts from Bitcoin to other cryptocurrencies. Prices and trading volumes of altcoins typically rise sharply, often outpacing Bitcoin. This period is driven by multiple factors — speculative trading, new project launches, technological breakthroughs, and increased real-world utility.

In contrast, Bitcoin dominance periods are characterized by Bitcoin’s strong position. The Bitcoin dominance index (measuring Bitcoin’s market cap share of the entire crypto market) rises significantly, indicating investors prefer holding Bitcoin. This usually occurs during times of increased market uncertainty or risk aversion. In these phases, altcoins may stagnate or even decline as investors seek “digital gold” for hedging.

From Capital Rotation to Liquidity-Driven: The Evolution of Altseason

Old Model: Simple Capital Shift

In previous crypto cycles, altseason operated quite simply — when Bitcoin’s price was stagnant for a long time, traders would shift funds from Bitcoin into altcoins for higher returns. The ICO boom of 2017 and the DeFi summer of 2020 are perfect examples of this dynamic.

At that time, the market was less mature, with trading mainly concentrated in BTC trading pairs. The flow of funds determined the strength of altseason.

New Model: Rise of the Stablecoin Ecosystem

Now, the situation is entirely different. The widespread use and ample liquidity of stablecoins (especially USDT and USDC) have become key drivers of altseason. It’s no longer just Bitcoin-to-altcoin conversions but a global liquidity allocation across different asset classes.

This shift signals an important market maturity indicator: altseason is no longer purely driven by speculation but is backed by real economic activity — increased trading volume in stablecoin pairs reflects genuine market demand and expanded institutional participation.

Ethereum’s Critical Role

In this evolution, Ethereum (ETH) plays a central role. As the hub of DeFi and NFT ecosystems, Ethereum’s performance often signals the direction of the entire altseason. When ETH appreciates relative to Bitcoin, it usually indicates that alternative coins are gaining market attention.

Analysts point out that institutional involvement is changing the game. Large funds continuously allocating to platform tokens like Solana and Ethereum suggest that altseason is no longer just retail-driven but an investment theme attracting institutional capital.

Signals from Bitcoin Dominance Index

The Bitcoin dominance index is an important tool for predicting altseason. Historically, when this index falls below 50%, it often signals the start of altseason. Currently, its trend is closely watched — if it continues downward, it will provide strong technical support for the upcoming altseason.

Analysts believe that when Bitcoin trades between and @E5@ USD, it could create an ideal environment for Ethereum and other altcoins to build positions.

Past Altseason Waves: Patterns and Insights

Late 2017 to Early 2018: ICO Frenzy

This period marked a turning point in crypto history. Bitcoin dominance index dropped from 87% to 32%, and altcoins experienced explosive growth. New tokens (including Ethereum, Ripple, Litecoin, etc.) attracted massive speculative funds. The total market cap soared from $30 billion to over $600 billion.

However, this boom was short-lived. Regulatory crackdowns and the failure of many projects led to the end of this altseason in 2018.

First Half of 2021: DeFi and NFT Rise

This phase saw a more diversified altseason. Bitcoin dominance index fell from 70% at the start of the year to 38%, while the market share of altcoins doubled to 62%. DeFi, NFTs, and memecoins became market focal points. Assets in these sectors grew by multiples or even hundreds of times.

The hallmark of this period was technological innovation combined with mainstream acceptance. By the end of 2021, the total crypto market cap reached a record high of over $3 trillion.

Q4 2023 to Mid-2024: Multi-Track Growth

This altseason was markedly different. Market optimism was fueled by expectations of Bitcoin halving and Ethereum spot ETF approvals. Unlike previous ICO and DeFi-driven periods, this altseason involved a broader range of sectors:

AI-related tokens performed remarkably. Projects like Render (RNDR) and Akash Network (AKT) surged over 1000%, reflecting strong market anticipation for blockchain + AI integration.

GameFi sector also saw a revival. Platforms like ImmutableX (IMX) and Ronin (RON) delivered significant returns, attracting both gamers and investors.

Evolution of Memecoins — assets once seen as purely speculative are evolving, incorporating new tech elements like AI.

Solana ecosystem expansion was another highlight. Ecosystem tokens surged by 945%, as the chain shed its “dead chain” label and promoted cross-chain memecoin popularity.

This broad-based altseason indicates a shift from single hotspots to a more diversified market landscape.

From Q4 2024 to 2025: Maturing Market Features

Institutional Capital Influx

After the approval of spot Bitcoin ETFs in January 2024, over 70 related products emerged, injecting confidence into the market. This not only enhanced Bitcoin’s legitimacy but also brought professional liquidity to the entire ecosystem.

Political and Regulatory Drivers

Supportive policymakers and expectations of a more friendly regulatory environment further boosted market optimism. This is especially beneficial for previously heavily regulated altcoins.

Market Size Breakthrough

The global crypto market cap has reached trillion, surpassing the 2021 high. This figure alone demonstrates the market’s maturity and depth.

Bitcoin Approaching Key Psychological Level

Since November, Bitcoin has broken previous highs and approached the $100,000 mark. Although it has not yet surpassed it by the end of December, market consensus expects this milestone to be achieved in 2025.

All these factors point to a new altseason already underway — an era defined by institutional participation, policy support, and market maturity.

The Rise Path of Altcoins: Four Stages of Liquidity Rotation

Altseason typically unfolds in four predictable stages, reflecting the cyclical nature of the crypto market:

Stage 1: Bitcoin Dominance Period

Capital flows into Bitcoin, the most stable asset. The Bitcoin dominance index rises, and trading volume concentrates in BTC pairs. Altcoins stagnate relative to Bitcoin. This stage usually lasts several months and sets the stage for subsequent rotations.

Stage 2: Ethereum Initiation

As market sentiment improves, funds begin flowing into Ethereum. The ETH/BTC ratio rises, indicating Ethereum’s outperformance relative to Bitcoin. DeFi and Layer-2 projects gain attention, with on-chain activity increasing significantly.

Stage 3: Mid-Cap Coin Rebound

Focus shifts to established projects like Solana, Cardano, Polygon. These coins start achieving double-digit gains, showing confidence spreading in the market.

Stage 4: Small-Cap Coin Explosion

The final phase is the true altseason — small-cap coins and emerging projects experience parabolic rises. Bitcoin dominance index drops below 40%, and various altcoins take turns leading the market.

Understanding these four stages is crucial for timely portfolio adjustments.

Key Signals to Identify Altseason

Bitcoin Dominance Index Decline

When the Bitcoin dominance index falls below 50%, it often signals the start of altseason. This indicator measures Bitcoin’s relative position in the crypto market — the lower the value, the greater the opportunity for altcoins.

ETH/BTC Ratio Performance

Ethereum’s performance relative to Bitcoin is a barometer of altseason strength. When this ratio rises, it indicates Ethereum (and by extension, the altcoin market) is outperforming Bitcoin.

Altseason Index

Developed by blockchain data providers, the Altseason Index measures the performance of the top 50 altcoins relative to Bitcoin. An index above 75 indicates that altseason has begun. As of December, the index has risen to 78, signaling the market is in altseason territory.

Surge in Altcoin Trading Volume

Especially, a significant increase in stablecoin trading pairs (USDT/USDC) indicates real capital inflow. When assets like AI tokens and memecoins see daily gains over 40%, it often signals a broad altseason is imminent.

Social Media Buzz Metrics

Discussion volume, trending topics, and influencer activity reflect market sentiment shifts. A transition from fear to greed indices often coincides with altseason onset.

Expansion of Stablecoin Liquidity

The depth and availability of stablecoins like USDT and USDC are foundational infrastructure supporting altcoin markets. Increased liquidity directly enhances trading convenience and price discovery.

Practical Guide to Altcoin Trading

Step 1: In-Depth Research

Any trading decision should be based on solid research. Understand project whitepapers, core teams, technical architecture, and market positioning. Avoid being misled by short-term price swings; focus on long-term value propositions.

Step 2: Diversify Your Portfolio

Don’t put all your funds into a single coin. Allocate across different risk levels — including stable, large-cap coins and mid-cap projects with growth potential — according to your risk appetite.

Step 3: Set Realistic Expectations

While altseason can bring attractive gains, recognize the high volatility of crypto markets. Prices can fluctuate dramatically within hours. Unrealistic expectations often lead to poor decisions.

Step 4: Implement Strict Risk Management

Use stop-loss orders to limit potential losses. Maintain reasonable position sizes and avoid excessive leverage. Balancing risk and reward is key to long-term success.

Risks and Traps in Trading

High Volatility as a Double-Edged Sword

Altcoins’ price swings are much more extreme than Bitcoin’s, which can lead to significant short-term losses. Low-liquidity trading pairs can also incur higher spread costs.

Market Sentiment Traps

Overhyped speculation can inflate asset prices artificially, creating bubbles. When these burst, they often cause catastrophic declines.

Fraud and “Pump-and-Dump” Risks

The market is rife with scams and “pump-and-dump” schemes (developers abandoning projects after fundraising). Be wary of manipulative behaviors like “wash trading” (artificially inflating prices).

Regulatory Uncertainty

Cryptocurrency regulations are still evolving globally. Sudden negative regulatory announcements can cause sharp market downturns.

How Regulatory Environment Affects Altseason

Regulatory policies have a complex, multi-directional impact on altseason.

Negative Regulatory Impact

Past cases show that strict ICO restrictions and tighter exchange regulations have interrupted altseason. These policies create market uncertainty, often dampening investor participation.

Positive Regulatory Push

Clear legal frameworks and supportive policies can promote market growth. Approvals of spot Bitcoin and Ethereum ETFs exemplify this — these measures enhance legitimacy, attract institutional investors, and expand participation.

Interaction Between Regulation and Market Sentiment

Policy stability and transparency directly influence investor confidence. When regulatory environments are clear and friendly, altcoins often see upward movement. Many analysts believe the current political climate is particularly favorable for altseason.

Summary: Preparing for Altseason

Altseason presents both opportunities and challenges. This cyclical market phenomenon creates wealth opportunities for investors willing to take risks and be prepared. Success hinges on: deep understanding of market dynamics, maintaining diversified portfolios, disciplined risk management, and constant vigilance.

As the market matures, altseason is evolving — from simple capital rotation to a complex phenomenon driven by liquidity, institutional participation, and policy environment. Understanding these changes will help investors better seize the next altseason wave.