With Bitcoin falling below the $12,000 level and dropping back to $11,400 in the last few days, the altcoins also seem to have lost their momentum, even after their impressive gains since early 2020. However, some believe that the „alt-season“ is alive and well and that the crypt coins still have room to grow, even after tokens like Chainlink and others have grown by more than 100%.
The rising price of the dollar may have been the main reason for the recent drop in the price of Bitcoin (BTC), with safe assets such as gold also falling. However, many believe the dollar is likely to decline, especially with the US stock market so overvalued. Therefore, it’s possible that the altcoin season will resume along with Bitcoin regaining its momentum.
While an alt-season is characterized by alternative currencies outperforming Bitcoin, this usually happens when the price of Bitcoin increases in value. Most major altcoins are correlated with Bitcoin, and when BTC goes up, some altcoins jump even higher, and vice versa. Jonathan Hobbs, author of The Crypto Portfolio and former manager of digital asset funds, told Cointelegraph that the boom can be attributed to three factors:
„First, the altcoin charts looked good, with Ethereum leading the charge. We saw the dominance of the 100 largest altcoins versus Bitcoin charts breaking a two-year downward channel in July. Secondly, there has been a lot of hype around DeFi projects like Chainlink, Aave and SNX. Thirdly, Bitcoin has risen or traded in a range since the March crash, which is usually good for altcoins in dollar terms. But if Bitcoin dives from here, we could see the altcoins that became parabolic fall much harder.
So what’s driving the recent increase, and does it affect only specific groups of tokens or assets with certain characteristics? Here’s a closer look at the apparent altcoin season, as Bitcoin dominance continues to fall to an annual low.
Again in 2017?
In 2017, as the price of Bitcoin rose to an all-time high, other digital assets also began to gain ground, many of them related to ICOs or other forms of fundraising. Some of these assets greatly outperformed Bitcoin and even continued to gain value when BTC began to fall.
Tether outperforms Paypal and Bitcoin in average daily transfer value
BTC began to lose market capitalization dominance in February 2017, falling from 86% at that time to the 50-60% range by the end of 2017, during the rally. After its price drop, Bitcoin’s dominance fell to less than 35% in January 2018 before recovering throughout 2018 and 2019.
Although Bitcoin’s dominance has been declining since early 2020, it’s currently at 58%, far from its 2018 lows. The market is also different from what it was in 2017, as exchanges and other spaces have raised their standards and regulated options for investment in altcoins have proliferated. Ryan Watkins, a research analyst at Messari, told Cointelegraph that the projects themselves are also showing significant improvements:
„The biggest difference between this bull market and the last bull market (2017) is that the market is rewarding existing products with a legitimate accumulation of value. Many protocols actually produce a cash flow for users. This is a big difference from the vaporware projects in 2017 that raised ridiculous amounts of money with nothing but a white paper.
During 2017, exaggeration and greed fueled much of the rally. As the ICOs made spectacular profits for investors, more money poured into the crypto market. Fear of missing an opportunity led many to invest during this time, and while many were left with large bags of worthless Etoro tokens – most of which were in the Ethereum Blockchain – there are still more Ether (ETH) portfolios with profits than Bitcoin portfolios with funds. According to Ilya Abugov, leader of open data in the analytical platform DappRadar, the previous season of altcoins was created by l