A massive surge in altcoin performance signals a potential bull market as 89 out of the top 100 cryptocurrencies outperform Bitcoin, mirroring conditions from the explosive 2021 crypto rally.
If you’ve been looking at the charts lately, you’ve probably noticed one thing — altcoins are exploding.
In the last week alone, we’ve seen XRP break $2.50, Hedera (HBAR) gain over 100%, Ethereum (ETH) touch its highest value in almost six months and Chainlink (LINK) reach a value not seen since January 2022.
Meanwhile, numerous smaller cap tokens have smashed through previous resistances to hit their all-time highest values.
Indeed, the total market capitalization of altcoins now sits at $1.369 billion, up from $784.7 million just 30 days ago — equivalent to a gain of 74.5%.
This is mainly due to the largely unexpected expansion of so-called large cap “dino coins”, ergo prominent cryptocurrencies that launched several years ago but had a relatively muted performance until recently.
Think XRP, Stellar (XLM), Cardano (ADA) and the like.
Now, according to one key metric, we may be in the early stages of a full-scale altcoin bull market.
Here’s why.
The Altcoin Season Index
Today, the CMC Altcoin Season Index hit its highest value this year, reaching 89/100.
Source: CMC Altcoin Season Index
This means that of the top 100 cryptocurrencies by market capitalization (the CMC100 Index), 89 of them outperformed Bitcoin (BTC) over a rolling 90-day window.
- A score 75/100+ indicates altcoin season
- A score of 25/100 or less indicates Bitcoin season
Source: CMC Altcoin Season Index
A value of 78 indicates we have just moved into altcoin season. Should the number continue to move closer to 100, this will act as further confirmation that altcoins are outperforming BTC and may continue to do so.
What to Expect?
The last significant altcoin season occurred back in H1 2021.
During this time, the top 100 altcoins gained 174% while BTC gained just 2%. As a result, Bitcoin’s market dominance collapsed from 61.9% at the start of February 2021 to as low as 40% in mid-May 2021.
Source: Bitcoin Dominance Chart
Meanwhile, many altcoins reached their cycle highs, including the likes of BNB, Dogecoin (DOGE), XRP and Chainlink (LINK).
In the last cycle, altcoins were able to outperform Bitcoin for almost 5 months straight.
However, the growth wasn’t uniformly distributed across all altcoins. Instead, altcoins within particularly hot narratives absorbed most of the gains, while less prominent narratives moved slowly.
In the 2021 cycle, the following narratives witnessed the most expansion.
- Decentralized Finance (DeFi): Including yield farms, decentralized exchanges, open lending protocols and aggregators. Prominent examples include Uniswap (UNI), Venus (XVS), Compound (COMP) and Curve (CRV).
- Layer 1 blockchains: Alternative smart contract platforms and a range of "Ethereum killers" achieved impressive valuations. Examples include Avalanche (AVAX), Fantom (FTM) and Solana (SOL).
- Play-to-Earn (P2E): Projects offering blockchain-enabled incentives for playing and/or infrastructure for blockchain-based games saw significant growth. Standouts include Axie Infinity (AXIE), Immutable (IMX) and Illuvium (ILV).
Right now, Bitcoin’s market dominance sits at 54.8%. Meanwhile, altcoins are exploding practically across the board.
These conditions are remarkably similar to those seen in H1 2021.
Should the market play out in a similar way, we might expect Bitcoin’s market dominance to fall to ~40% while altcoins gradually eat into its market share in the coming weeks and months.
What You Can Do Now
Now, the obvious question is… How can you prepare yourself for what comes next?
Well, as the old saying goes “History never repeats itself, but it often rhymes” — Mark Twain.
Put simply, this means it’s a good idea to understand what happened before to get at least a partial understanding of what could happen next.
For one, it’s wise to keep an eye on the CMC Altcoin Season Index. As the number gets closer to 100 you might start skewing your focus towards altcoins, whereas if the number retraces closer to 0, then BTC begins to look more appealing.
Perhaps most importantly, it’s a good time to begin forming your thesis about which narratives and verticals will capture the majority of the mindshare and growth.
There are already several narratives that have formed in recent months, some of the most prominent currently include:
- Real World Asset (RWA) Tokens
- Artificial Intelligence & Big Data Tokens
- Meme Coins
- Modular Blockchain Tokens
- Data Availability Layer Tokens
- Layer 1 Tokens
Once you’ve got your thesis nailed down, it’s time to strategically gain exposure to a range of assets in the categories you think will perform best. See our article on How to Invest in Cryptocurrency for more on this topic.
Crucially, it’s extremely important to define both your entry and exit targets for your investments. It can be euphoric to continue holding a token while it achieves several multiples of your entry, but be careful not to “roundtrip” your investment — that is continue holding while it collapses back to or below your entry.
Historically, altcoin seasons haven’t lasted more than a few months — though the absolute best performers may continue to outperform BTC for far longer.
One often touted strategy is to “let your winners run”. This simply means holding onto your best performers rather than selling too early.
>> That’s all for today. If you’d like to take additional steps to prepare yourself for a potential full-blown altcoin bull market, we recommend the following for further reading [1], [2] and [3].
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