Altcoin season: What it means and how you can get involved

While learning about cryptocurrency investing online, you may have noticed a lot of buzz around what many traders call “altcoin season.” Many see this period as the perfect time to invest in new cryptocurrency projects — particularly those that are smaller, more recent additions to the industry — as they look to diversify their portfolios and turn a profit.

So, what exactly is altcoin season, and should you care? In this AAG Academy guide, we’ll teach you everything you need to know, including how to buy your own altcoins, when might be a good time to buy them, and whether or not it’s a good idea in the first place.

What is an altcoin?

One of the great things about the term “altcoin” is that it’s incredibly easy to understand. The word comes from a combination of “alternative” and “coin,” and we use it to describe any cryptocurrency that isn’t Bitcoin. Some people consider altcoin to mean any cryptocurrency that isn’t Bitcoin or Ethereum, but that’s a more recent definition.

Bitcoin is the original cryptocurrency that started it all when it made its public debut back in 2009. Ethereum launched a lot later in 2015, but since most of the cryptocurrencies on the market today are a fork of either Bitcoin or Ethereum, both are viewed as “original” coins. Bitcoin and Ethereum are also the biggest cryptocurrencies by market capitalization.

There are tens of thousands of altcoins in existence today, and hundreds of new ones launch almost every day. Each has its own goals and objectives and hopes to do things a little differently from all the others, and while the majority sadly end up as failed projects, there are certainly times when a promising altcoin becomes a big success with a lot of value.

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What is altcoin season?

Altcoin season is a period of time when altcoins outperform Bitcoin. Bitcoin has become so popular and so valuable that it accounts for a large portion of the trading volume across the entire cryptocurrency industry. So much so that there is a metric that compares the market capitalization of Bitcoin with the current value of every other cryptocurrency combined.

The ratio between these two figures is what the market refers to as “Bitcoin dominance” or “BTC dominance.” For many years, Bitcoin’s value was significantly greater than that of all other cryptocurrencies — sometimes by as much as 100%. However, in recent times, thanks to the rising popularity of cryptocurrency in general, Bitcoin’s dominance has fallen.

So, occasionally, we see what is referred to as altcoin season, when the value of altcoins actually rises above that of Bitcoin for a period of time. This usually happens shortly after Bitcoin’s value has risen and then begun to level out, which is when investors will sometimes sell some of their BTC assets and put them into other coins and tokens.

Many seasoned traders see altcoin season as an opportunity to diversify their portfolios and perhaps turn a quicker, more exciting profit on cryptocurrency projects they may not typically invest in, such as Ethereum, Cardano, Polkadot, or perhaps much smaller alternatives.

When to buy altcoins

One of the best times to buy altcoins, then, is just before altcoin season gets into full swing. Their value may already be rising, but there’s a good chance it will rise even further, giving you a great opportunity to earn a return on your investment. However, it is always important to remember that there are no guarantees when it comes to cryptocurrency investing.

It’s almost impossible to predict how long an altcoin season will last, or how significant it will be. There’s also no telling how much of an impact it will have on the particular altcoin you have chosen to invest in. With that in mind, it’s always best to do your own research before putting money into crypto projects and only invest in those you are confident in.

While altcoin season is certainly worth taking into consideration, it should not be the only factor in your decision-making. And, most importantly, you should only ever invest what you can afford to lose — just in case it turns out to be an unsuccessful move.

How to buy altcoins

Many major altcoins, such as Ethereum and the others we mentioned above, are now available to purchase from centralized exchanges like Binance, Coinbase, Kraken, and many more. That means you can invest in them using little more than a debit card in many markets, and there’s no need to create a decentralized wallet beforehand.

However, if you are interested in investing in smaller, less established projects that have the potential to see more significant gains, a decentralized wallet is a must. You will also need to acquire a more mainstream and more accessible cryptocurrency — such as Bitcoin or Ethereum — first before using a swapping service to exchange it for something else.

If you want to invest in AAG, for instance, one way to do that is to first purchase some Ethereum from a centralized exchange using your debit card. You can then transfer your ETH coins to a decentralized wallet — such as the excellent MetaOne wallet from AAG itself — before connecting it to Uniswap and then swapping it for AAG.

What are the types of altcoins?

We’ve already mentioned several altcoins in this guide, including Cordana, Polkadot, and AAG — and there are literally thousands of others to choose from. There are also different types of altcoin to consider, each of which is designed to perform a different function. Some are payment coins; some are utility tokens, and others prove ownership of an asset.

To find out more about the different types of altcoins, see our AAG Academy guide to understanding the difference between cryptocurrency coins and tokens, in which we look at utility tokens, governance tokens, security tokens, and more in greater detail.

Is investing in altcoins a good idea?

Only you can decide if investing in altcoins is a good idea. It all depends on your own situation and what you hope to achieve from investing. While it can be a profitable venture, there are risks — much like those associated with any kind of investing — and the harsh reality is that many altcoins fail before achieving any kind of success.

Carry out your own research and only invest in projects that you feel have promise. See our guide to cryptocurrency investing if you’re a newcomer and you’re unsure of where to start, and only invest what you can afford to lose.

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References

• Altcoin
• Altcoin Season – What when and why
• Bitcoin dominance
• What is altcoin season