It’s Beginning to Look a Lot Like Altcoin Season

After a scorching price run that ended with an all-time high around $41,000, Bitcoin (BTC, Tech/Adoption Grade “A-”) has been retesting its 21-day moving average over the last week.

In other words, from here, it looks like Bitcoin is deciding whether to continue its upward trajectory or to settle further into correction — a longer, more refreshing pause, perhaps.

In the 2017 bull run, we saw BTC correct on the order of 40% multiple times. That would indeed be scary-drastic price movement in other, old-school financial markets. But — and you have to be prepared for this — this is perfectly normal behavior for cryptocurrencies.

Meanwhile, altcoins have been making moves while Bitcoin is stalling.

Polkadot (DOT, Tech/Adoption Grade “C”) and Chainlink (LINK, Availability/Liquidity Grade “B”) have led a group of altcoins to new all-time highs this week. This, too, is normal.

We typically see a trend of large altcoin price movement after a run-up in the Bitcoin price. Bitcoin and, on a smaller scale, Ethereum (ETH, Tech/Adoption Grade “A”), tend to lead the market on the way up during bull runs.

Once Bitcoin starts to trade sideways or investors take some profits, some of that money flows into altcoins. And that, of course, drives up the prices of these alternative investments.

As Raoul Pal notes, investors start to look for potentially higher returns in more risky investments after the price run ups in Bitcoin and Ethereum. Often, these altcoins can see much larger returns than Bitcoin due to their smaller market caps.

We could be seeing the early signs of a new market phase, evidenced by new highs for these altcoins

One of the altcoin segments that might see even more investor attention — and therefore even more outsized returns — is “decentralized finance,” or DeFi, the 2020 crypto industry darling.

After the 2020 DeFi summer, more people now know about these coins, and they might turn their attention that way once this altcoin season begins. We’re keeping a close eye on what we consider to be DeFi blue chips.

Altcoin seasons tend to be some of the most fun times in the cryptocurrency markets. Whether we’ve entered this stage of the market cycle is yet to be determined.

What is certain is that we’re in for exciting times ahead.


Juan and Bruce

About the Senior Analyst

Dr. Ng was among the first to introduce decentralized finance (DeFi) to investors. He’s a space scientist with a degree from the International Space University, having interned both with NASA and the European Space Agency. Today, however, he dedicates his career to exploring the crypto space, applying the same kind of scientific discipline that has earned him several awards in physics.

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