Altcoin Summer

What Is Altcoin Summer?

Altcoin summer refers to a market phase when alternative cryptocurrencies see their prices increase while Bitcoin’s dominance decreases. During these periods, seasoned investors shift their focus from Bitcoin to smaller cryptocurrencies, while retail investors or newcomers also engage due to increased attention on social or traditional media. This then drives up altcoin prices, creating opportunities for significant returns.

The term is sometimes used interchangeably with “altcoin season” or “altseason.” These periods typically occur during bull markets when overall crypto sentiment is positive and investors are willing to take risks on newer or smaller projects. Notable examples include late 2017 to early 2018, when Bitcoin dominance fell from 86% to 39%, and early 2021, when Bitcoin dominance dropped from 70% to 38% as investors flocked to DeFi projects, NFTs, and memecoins.

How Does Altcoin Summer Work?

Altcoin summer typically begins when Bitcoin’s price action becomes less exciting to investors, either due to sideways movement or slower growth compared to earlier periods. Investors who made gains from Bitcoin often look to diversify into altcoins seeking higher returns. This creates a cycle where money flows from Bitcoin into larger altcoins first, then gradually into smaller and more speculative projects.

Market psychology plays a significant role during these periods. As some altcoins begin to outperform Bitcoin, fear of missing out drives more investors to explore alternative cryptocurrencies. Social media and crypto communities often amplify this trend, with successful altcoin traders encouraging others to participate (at times as part of a “pump and dump”).

The phenomenon is often measured by Bitcoin dominance – the percentage of the total cryptocurrency market cap that Bitcoin represents. During altcoin summer, Bitcoin dominance typically falls as altcoins gain market share. Trading volume also tends to increase across altcoin markets as investor interest and speculation intensify.

However, altcoin summers don’t last indefinitely. They often end when market sentiment shifts, or when Bitcoin begins another strong upward movement that recaptures investor attention. Many altcoins that gained significantly during these periods can also experience sharp declines when the trend reverses.