Key Takeaways:
- What is Altcoin Rotation
- Causes of Altcoin Rotation
- How can you determine Altcoin Rotation
- Conclusion
Altcoins or “Alternate Cryptocurrencies” are referred to as all crypto tokens other than Bitcoin (BTC). Since the launch of Ethereum (ETH), the first-ever altcoin, the cryptocurrency landscape has truly transformed.
Evolving from a niche sector that was hiding under Bitcoin’s shadow into an ever-growing ecosystem ripe with innovation on all fronts. With new tokens and varying trends flooding the dynamic market, altcoins are now well capable of initiating their own rally.
Today we will discuss a phenomenon known as the “altcoin rotation”. Where traders shift their focus from Bitcoin to other cryptocurrencies. The event also called “altcoin season” occurs when Bitcoin’s price momentum slows down, and traders are forced to look for investment opportunities elsewhere in the market.
So let’s get started.
What is Altcoin Rotation?
As we mentioned earlier, Altcoin Rotation is when traders seek other investment opportunities in the cryptocurrency market rather than solely focusing on Bitcoin. During this event, profits of one crypto are “rotated” into another token, essentially causing successive rallies across various altcoins and triggering the “Alt Season”.
What Causes the Altcoin Rotation?
Alt Season starts when the market dominance of Bitcoin experiences a slowdown in growth compared to the rest of the market. This decline in the total market share held by BTC results in traders moving on to purchase other cryptocurrencies like Ether (ETH), Solana (SOL), or Cardano (ADA), depending on their popularity.
Savvy traders who bought tokens down low, are now selling their shares high and are on the hunt for assets with more room for growth.
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How Can You Determine an Altcoin Rotation Season?
Though there is no specific cycle to predict when the Altcoin Rotation phenomenon will occur. Multiple factors culminate in triggering the widespread market event that leads to altcoins targeting their yearly or all-time highs.
Price Movements
You can monitor the price movements across a range of altcoins and if there is a surge in the prices of lesser-known or crypto with a smaller market cap. It could indicate the onset of the altcoin rotation.
Shift In Bitcoin Market Dominance
It is important to keep a close watch on the market dominance of the premier cryptocurrency. If there happens to be a decline in BTC’s overall market share and a subsequent rise in altcoin prices. Then it is a sign of an oncoming alt season.
Increased Trading Volume
If you happen to notice a substantial increase in the trading volume of Ethereum (ETH) and other cryptocurrencies. It signifies increased investor interest in the assets. This is a key indicator of an altcoin rotation.
Listing of New Altcoins
The crypto market could also experience an alt season if there are a large number of new cryptocurrencies being launched. However, new token launches may not necessarily create a rally that could be humongous but could propel the prices of Layer-1 blockchains on which they are deployed.
Conclusion
Altcoin Rotation occurs when the capital invested in Bitcoin is shifted onto other tokens in the market when the price momentum of the world’s most valuable cryptocurrency starts to move sideways. The phenomenon is most likely to trigger what is known as the Alt Season. Propelling the prices of major altcoins to their all-time highs.
There are several ways in which you can anticipate an Altcoin Rotation to occur, like watching the price movements of alternate crypto tokens, observing the shift in Bitcoin’s market dominance, increasing trading volumes of cryptocurrencies other than BTC, and listing new tokens in the market.
Although there is no guarantee as to when the Alt Season could occur. The technical factors mentioned in this article could be used to predict the occasion. However, it is also crucial to understand the level of risks associated with investing in cryptocurrencies, including altcoins.
You should not take the contents of this article as investment advice. It is highly recommended to do your own research when it comes to making financial decisions.
Have fun but invest responsibly!
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