BITCOIN BULL SEASON VS. ALTSEASON
IntroductionThere are currently 5,035 cryptocurrencies listed on CoinMarketCap but with Bitcoin, just one cryptocurrency is accountable for over 50% of the total crypto market cap. With so much dominance of the whole market cap and Bitcoin also being a trading pair for most coins, the whole Altcoin market is highly depending on the largest cryptocurrency. Therefore, crypto cycles are mostly divided in Bitcoin bull cycles, where most Altcoins lose value against Bitcoin, or Altseasons, in which most Altcoins gain value against Bitcoin. In this article, I want to discuss and analyze both types of seasons.
Identifying Bitcoin and Altcoin seasonsFirst of all, we have to identify Bitcoin seasons and Altseasons. While there are certainly single days, in which Altcoins gain more than Bitcoin and vice versa, I prefer to identify these cycles in a macro perspective, allocating at least a few weeks to each season. The seasons can be identified best with the Bitcoin dominance chart provided by CoinMarketCap. When there is a period of rising Bitcoin dominance, it is a Bitcoin season, whereas a period with decreasing Bitcoin dominance signals an Altseason. Utilizing this method, I identified 7 Bitcoin seasons and 7 Altseasons since December 2014 – which are depicted in the following graphic. It also shows the BTC and ALTS dominance simplified from highest/lowest point at the start of a season to the lowest/highest point at the end of a season:
The graphic displays Bitcoin dominance (colored in red) and Altcoin dominance (colored in blue) of the total crypto market capitalization. The two most obvious observations are: Bitcoin and Altcoin seasons are alternating patterns and Bitcoin’s dominance has decreased over time, even though it had a spike recently. While Bitcoin’s dominance was above 80% throughout 2015 and 2016, it went as low as 33% in January 2018. Since then, it has gone up to a value as high as 71% recently and is currently at 66%.
Length and frequency of seasonsLet’s have a closer look at the length and frequency of the seasons. On average, a Bitcoin season lasted 166 days, while an Altcoin season lasted 94 days. Considering particular months, the distribution of seasons is relatively balanced. Outliers in this dataset are the months May, July and October. In four of the last five years Altcoins gained against Bitcoin in May, while Bitcoin’s market cap rose higher percentage-wise against Altcoins in July and October. See the following graphic for more details:
Market cap during seasonsHow did the market cap of Bitcoin and Altcoins change during their respective seasons? The average Bitcoin season made Bitcoin’s market cap increase by 125%, while the average Altcoin season made the overall market cap of all Altcoins increase by 663%. However, these averages are largely inflated by the price movement in 2017, where the Altcoin market cap increased by 3296% in the first half of the year, while the Bitcoin market cap increased by 605% in the second half of the year.
If we erase these two seasons from the average calculation, Bitcoin’s market cap increased by an adjusted average of 45% in a Bitcoin season while the Altcoin market cap increased by an adjusted average of 136% in an Altcoin season (since December 2014). Therefore, the Altcoin increases are nearly 3x higher percentage-wise in an Altcoin season than Bitcoin increases in a Bitcoin season. However, the performance of Altcoins in Bitcoin seasons is also worse than the performance of Bitcoin in Altcoin seasons. On average, the market cap of Altcoins decreased by 16% during Bitcoin seasons, whereas the Bitcoin market cap increased by 30% on average in Altcoin seasons. The following graphic contains all identified seasons since December 2014 and their respective market cap decreases and increases. I also added the current Altcoin season, that started in September 2019, although it is not included in the above-mentioned calculations yet:
Critical discussion of the analysisCriticism concerning this analysis can be targeted towards the rather small sample size. Bitcoin has been around for only 11 years and the Altcoin market as a whole is even younger. At the end of 2013, there weren’t even 100 Altcoins listed on CoinMarketCap, which is why I decided to start with this analysis at the end of 2014, when there were at least 500 Altcoins listed on CoinMarketCap. This provides us with five years of market data, that resulted in the identification of 14 different seasons, which is a small sample size. It’s not a failure of this analysis though, it is simply a result of the crypto market being relatively new. It will be interesting to see, whether the same patterns will be visible in several overhauls of this analysis during the next few years.
Wrap-upBitcoin and Altcoin seasons are alternating market movements in the crypto market. In this analysis, a prolonged increase of Bitcoin dominance in the whole crypto market capitalization was declared as a Bitcoin season, while a prolonged increase of Altcoin dominance was declared as an Altcoin season. This method identified 7 Bitcoin and 7 Altcoin seasons. A comparison of these seasons against each other outlined, that Bitcoin dominance decreased over time, even though Bitcoin seasons are on average 1.8 times longer than Altseasons. During the last 5 years, Altcoin seasons were more likely to happen in the first half of a year than in the second half. The analysis also displays that Altcoins on average increased by a larger percentage in an Altcoin season than Bitcoin increased in a Bitcoin season. However, the Altcoins’ USD market capitalization on average decreased during Bitcoin seasons, whereas Bitcoin’s market cap in fact increased on average during Altcoin seasons.
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