How Altcoin Season May Affect Bitcoin
Over the past few weeks, Bitcoin (BTC) quotes have been in the same price range (about $52–58 thousand.) But at the same time, the increase in the cost of altcoins was noted. For example, Ethereum (ETH) has reached its all-time high of $3,000.
It could indicate the onset of the so-called altcoin season when investors begin to shift capital from the leading cryptocurrency to lesser-known and capitalized digital coins.
LATOKEN experts will try to explain whether the altcoin season has really come and what it means for the crypto market.
LATOKEN does not provide investment advice; the material is written for informational purposes only. Cryptocurrency is a volatile asset that can lead to financial losses.
Crypto market change
There is an opinion that it was possible to talk about the season of altcoins and Bitcoins earlier; since then, retail investors have dominated the crypto market. However, the situation is much more complicated right now, as there is a big gap between the retail and institutional investors’ behavior.
It’s logical that institutional investors still prefer the most stable coins, where the risks of total depreciation are below average.
Among retail investors, it should be noted that panic and emotional decisions dominate, so many rushed to reallocate assets from Bitcoin (BTC) to altcoins, which have a higher risk of depreciation, but also have a higher chance of making multiple profits. The willingness to invest in riskier assets is observed to a greater extent among retail investors than among institutional investors.
Institutional investors are in no hurry to get rid of purchased Bitcoins. They would not sell the asset when it sank since these are emotional decisions that characterize novice retail investors, not professional traders. Institutionals will hold Bitcoins until they see the return they want.
If the portfolio is well-diversified and risks are hedged in the futures market, then there is no point in selling Bitcoins at all.
Bitcoin’s dominance may decline in the long term. This may happen due to the growth of altcoins from the top 20 and a general dilution of shares against the backdrop of a steadily growing DeFi segment.
This situation can be called a full-fledged altcoin season since, during the last altcoin season, the dominance of Bitcoin decreased by half in less than four months. Now, we can notice a decrease in the share within 10%, which fits well into the standard market cycles. In the coming weeks, the altcoin market may continue to grow faster than the first cryptocurrency, but the opposite is also quite natural.
It is possible that from time to time, there will be a redistribution of capital from altcoins back to Bitcoin (BTC), which will be able to break through the psychological level of $100 thousand at the end of summer. This, in turn, will provoke investors to re-transfer capital to the first cryptocurrency.
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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.