This Event Could Be Bigger Than the Bitcoin Halving

|February 6, 2024

I’m going to let you in on a little secret…

And it’s one a reader nailed with their question last week…

Generally, the alt coins pretty much rise and fall in value right in line with Bitcoin (with only small percentage differences in the rise or fall). When will we see some separation from this with the alt coins forming their own distinctive pricing patterns? – Reader Dave B.

We’ve talked a lot about the crypto bull market in the context of Bitcoin. But we haven’t delved too much into what comes after the Bitcoin bull run.

This is known as “alt season.” And it’s bigger – much bigger – than the Bitcoin halving.

A Primer on “Alt Season”

Alt season describes a period when altcoins – cryptocurrencies other than Bitcoin – significantly outperform Bitcoin.

It usually comes after Bitcoin has had a major bull run and starts to stabilize or consolidate.

During alt season, investors often diversify their portfolios away from Bitcoin into altcoins. And that leads to a surge in the prices of these alternative cryptocurrencies.

There’s a lot of historical precedent for it. A classic example of alt season occurred in late 2017 and early 2018. After Bitcoin soared to nearly $20,000 in December 2017, altcoins like Ethereum (ETH), Ripple (XRP) and Litecoin (LTC) saw big gains in the weeks following.

Ethereum, for instance, skyrocketed from around $300 in November 2017 to more than $1,400 in January 2018… a gain of 300%.

Bitcoin - Ethereum

It happened again in early 2021, where altcoins collectively experienced massive gains following Bitcoin’s rally to new all-time highs. Coins like Binance Coin (BNB) and Cardano (ADA) saw remarkable increases in value, independent of Bitcoin’s price movement.

Driving Factors Behind Alt Seasons

Clearly, altcoins like it when Bitcoin rallies. There is simply more cash for cryptocurrency investors to spread into other altcoins.

But there are a few other reasons for this.

First is the desire for higher returns. After a significant Bitcoin rally, many investors start looking for the next big opportunity. Altcoins, with their lower market caps and potential for high growth, become attractive targets… especially when crypto speculators start to “chase” gains higher.

Second is wider adoption. Alt seasons often coincide with advancements or milestones in specific altcoins or their underlying technologies. For example, Ethereum’s upgrade plans or DeFi’s growth have previously fueled interest in specific altcoins.

Lastly is Bitcoin’s market dominance. When Bitcoin’s market dominance begins to decrease, it often signals the start of alt season.

Bitcoin Market Dominance

This decrease indicates that investors are moving their funds from Bitcoin into altcoins.

But are we on the brink of another alt season?

This “Alt Season” Indicator Has a 100% Hit Rate

Alt season has historically started later in the crypto cycle.

So where are we in today’s crypto cycle?

Let’s look at my favorite crypto indicator… net unrealized profit/loss (NUPL). NUPL takes all the Bitcoin out there and calculates whether it’s currently worth more (or less) than when it was bought. If the value’s up, you’ve got unrealized profit. If it’s down, you’re staring at unrealized loss.

NUPL then adds up all these profits and losses from everyone holding Bitcoin. The end result? A simple number. If it’s above zero, more people are in profit, meaning the overall mood is optimistic. If it’s below zero, losses are winning, and the mood’s likely downbeat.

And as we talked about last week… once it hits 75% it’s time to sell.

NUPL is currently at 42%… meaning we’re roughly halfway through this crypto cycle.

Bitcoin - Net Unrealized profit/loss

And if you look at the historical start of previous alt seasons (i.e. December 2017 and January 2021) they usually start when NUPL is near 65%.

So while it’s not quite time for alt season, it is time to start positioning for it.

The Final Alt Season

If history is any guide, we’re approaching what could be a pivotal moment in this crypto cycle – the onset of the final alt season. While NUPL suggests we’re not quite there yet, savvy investors should already be eyeing potential opportunities in the altcoin market.

This isn’t just about jumping on the bandwagon. It’s about strategic positioning and understanding market dynamics.

As we edge closer to the 65% NUPL mark, it’s crucial to research and identify altcoins with strong fundamentals and growth potential. Whether it’s advancements in technology, increased adoption, or unique use cases, the right altcoin picks could offer significant returns.

I’ll have much more on altcoins soon. Stay tuned.

Note: Keep the crypto questions coming! Send them to mailbag@manwardpress.com and I’ll be sure to address them in a future essay.


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