Bitcoin may have pulled the crypto market out of its months-long slump, but the current big winners are altcoins, as many cryptocurrencies have outperformed BTC over the past few weeks.
Is the crypto market igniting another altcoin season? How can we benefit from this rally? We will explore the answers in this article.
Altcoins Have Performed Exceptionally Well in Q4
Digital assets other than Bitcoin—altcoins—have shown outstanding performance in the final quarter of this year, with some starting their upward trends even earlier.
Since mid-September, Bitcoin has grown by over 40%, stabilizing above $35,000, while Solana (SOL) has tripled in value. Injective (INJ) and Chainlink (LINK) have surged by 150%. Avalanche (AVAX), Aave (AAVE), Polygon (MATIC), and Cardano (ADA) have also outperformed Bitcoin over the past 60 days.
More importantly, although Bitcoin found support at $34,000 and moved sideways in November, many altcoins continued to expand their gains or began competing fiercely with BTC. Filecoin (FIL), Uniswap (UNI), and Cosmos (ATOM) have been particularly active recently.
What Is Driving the Altcoin Rally?
Altcoins are currently performing well, but the reality is that Bitcoin remains the primary driver and holds the key to the current rally. As the largest cryptocurrency by market capitalization, Bitcoin accelerated its bullish sentiment in mid-October, fueled by investor excitement over the potential approval of one or more Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC). Additionally, the digital asset has served as a safe haven amid escalating geopolitical tensions.
Since the crypto market tends to follow Bitcoin’s fundamentals, the oldest cryptocurrency acts as a trigger. Now, with increasing risk appetite, altcoins continue to move by inertia.
Due to its massive market cap, Bitcoin has less room for sustained rallies, leading investors to focus on small and mid-cap cryptocurrencies in pursuit of double-digit gains, including the use of leverage.
Has the Altcoin Season Arrived?
Many altcoins have outperformed Bitcoin in terms of percentage gains, but can we truly speak of the beginning of another altcoin season? Signs suggest it’s possible, but it’s too early to confirm. The crypto community considers it an altcoin season when the majority (at least 75%) of the top 50 coins by market cap outperform Bitcoin over 90 days. We have only witnessed this for a few weeks, and it remains to be seen whether altcoins will continue to succeed.
So far, over a three-month period, 50% of the top altcoins have outperformed Bitcoin. This isn’t enough yet, but it’s a strong start: at the end of October, only 13% of the top altcoins were beating BTC.
Whether officially in an altcoin season or not, now might be a suitable time to seek profits beyond Bitcoin. However, altcoins are currently highly volatile, which involves greater risk.
During such intense price fluctuations, traders seek quick profits, but the persistent risk of significant corrections makes trading more challenging, especially for beginners.
Traders must support their positions with robust technical analysis and keep a constant eye on market sentiment. More importantly, this is the worst time to deviate from trading strategies and make hasty decisions. Our psychology may not withstand the pressure of high volatility, which could lead to erroneous moves.
How to Trade Altcoins?
Trading altcoins requires a disciplined approach, especially during periods of high volatility. Here are some key strategies to consider:
- Technical Analysis: Use indicators like moving averages, RSI, and MACD to identify entry and exit points.
- Risk Management: Set stop-loss and take-profit levels to protect your capital.
- Market Sentiment: Stay updated with news and social media trends that could impact prices.
- Diversification: Spread investments across multiple altcoins to mitigate risk.
One of the best ways to benefit from this altcoin explosion might be to rely on tested automated trading tools. For example, some platforms help traders customize their own trading bots based on preferred strategies. This automates the trading process, eliminating the negative impact of emotions. During high volatility and unpredictable movements that are hard to predict with the naked eye, such tools are especially valuable.
👉 Explore advanced trading strategies
Automated tools allow traders to analyze the crypto market to open and close positions without direct user involvement. The tool follows a pre-selected strategy, relying on technical analysis and market sentiment to support its moves.
For instance, in the context of Solana's rising value, a trader could use a bot to implement a long-term strategy, set profit targets, and apply necessary risk management tools like stop-loss or trailing stop-loss, while utilizing trading signals to start or end trades in line with their personal strategy and risk tolerance.
For beginners, there is an opportunity to replicate the trading bots of more experienced traders with a few clicks, giving them access to seasoned professionals' strategies.
This functionality is particularly useful for those new to cryptocurrency trading, as it enables them to learn and borrow strategies from experienced traders. It not only helps them understand market dynamics and trading techniques faster but also provides a safer trading environment while they gain more experience.
Automated trading tools can easily integrate with many cryptocurrency platforms, including major exchanges, helping traders implement strategies on their existing accounts. They also often provide proprietary trading terminals with intuitive interfaces and numerous features.
This allows traders to automate their trading process on their platform of choice using advanced automation tools. Such integration offers flexibility and convenience, enabling traders to apply sophisticated strategies in a familiar environment. Additionally, these terminals often provide various analytical tools and indicators to assist with market analysis and decision-making.
By leveraging automation, traders can turn volatility from an enemy into a friend. Automated tools enable more effective strategy execution in high-volatility markets, reduce the impact of human emotions, and improve trading efficiency and precision.
With these tools, traders can time market entries and exits, using technical analysis and preset strategies to seize opportunities and profit from altcoin market fluctuations. This way, traders can better control risk while capturing trading opportunities that may yield high returns in a short time.
Frequently Asked Questions
What is an altcoin season?
An altcoin season refers to a period when a majority of alternative cryptocurrencies outperform Bitcoin in terms of percentage gains. It is typically confirmed when at least 75% of the top 50 coins by market cap beat BTC over 90 days.
How can I identify the start of an altcoin season?
Monitor the performance of top altcoins relative to Bitcoin over time. Tools like the Altcoin Season Index can help gauge whether the market is entering such a phase. A sustained period of outperformance is a key indicator.
What are the risks of trading altcoins during high volatility?
High volatility can lead to significant price swings, increasing the risk of substantial gains or losses. Without proper risk management, traders may face rapid capital depletion. Emotional decision-making can exacerbate these risks.
Why use automated trading tools for altcoins?
Automation helps execute strategies based on pre-defined rules, reducing emotional bias. It allows for continuous market monitoring and faster execution, which is crucial in volatile markets where opportunities arise and vanish quickly.
Can beginners trade altcoins successfully?
Yes, but it requires education, practice, and risk management. Beginners should start with small investments, use demo accounts, and consider copying strategies from experienced traders through automated platforms.
How important is technical analysis in altcoin trading?
Technical analysis is vital for identifying trends, support and resistance levels, and potential entry/exit points. It provides a structured approach to decision-making, especially in a market driven by sentiment and speculation.
This article is for general informational purposes only and should not be considered legal or investment advice. The views and opinions expressed are those of the author and do not necessarily reflect the official policy or position of any affiliated organization.