Bitcoin vs Altcoins: A Balance Sheet Forecast for 2023
Many traders and investors are eagerly awaiting the start of the altseason. Traditionally, it kicks off after a substantial rise in the Bitcoin price and the onset of an extended sideways trend. However, as of 2023, such a scenario has yet to materialize…
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Since the beginning of 2023, the oldest cryptocurrency has been on a steady upward trajectory. Yet, despite Bitcoin's climb from $16,000 to $31,000, altcoins haven't showed the same level of steady growth. Although a few notable exceptions, like DASH and NEO, pleased investors with their value doubling in January, these coins have experienced a downward trend since then.
So, the question remains: when can we expect the altcoin season and a surge in altcoin dominance in 2023? And which altcoins might hold the most potential following another Bitcoin rally? We'll attempt to address these questions in the following discussion.
The Evolving Market Share of Bitcoin and Altcoins Throughout 2023
A look at the Bitcoin dominance chart reveals that the market share of the flagship cryptocurrency has risen from 38% to 47% since the beginning of 2023.
Bitcoin's market share (or dominance) has been on an upswing since the onset of 2023. Source: CoinMarketCap
Given the current trend, the arrival of the much-anticipated altseason seems rather unlikely. As such, altcoin holders may need to exercise patience and await a more opportune moment.
What is Altcoin Season in Layman's Terms?
Altcoin season (altseason) refers to a time span (at least 90 days) where, three-quarters of the top 50 altcoins (alternative cryptocurrencies to Bitcoin) by market capitalization on CoinMarketCap outperform Bitcoin in terms of growth.
The Ideal Scenario for Altseason to Occur
The ideal circumstance would see Bitcoin's growth persisting, allowing it to claim a 52-55% share of the market. This could tempt large-scale and individual investors, who initially invested when Bitcoin was worth between $16,000 and $25,000, to secure their profits by shifting to either stablecoins or altcoins. If this sell-off is widespread, it could shrink Bitcoin's market share to between 40% and 44%, potentially sparking the long-awaited altseason. Given the right conditions, popular altcoins could potentially experience dramatic growth, ranging from 50% to 300% or even more.
Historically, altcoins have started to rally when Bitcoin's market share falls to 40% or less. This pattern was observed during the altseasons from June to November 2017, January to April 2018, and May 2018 to September 2019.
However, if Bitcoin continues to expand its dominance, there's a risk that only a select few altcoins and less reputable cryptocurrencies might become the subjects of ‘Pump & Dump' schemes, enabling them to turn a profit. In this case, the altseason might not start at all.
The Most Promising Altcoins
The most attractive altcoins for investment are usually those that are decentralized, backed by robust technology, managed by competent developer teams, and supported by a large and active community. These assets tend to be highly liquid, widely listed on numerous exchanges, and boast substantial daily trading volumes. Such altcoins include Ripple (XRP), Cardano (ADA), Litecoin (LTC), Monero (XMR), Stellar (XLM), EOS (EOS), and Neo (NEO) among others. Interestingly, Dogecoin (DOGE) also falls into this category. Though it's hard to consider this coin a tech-centric asset, the personal endorsement from figures like Elon Musk allows this speculative cryptocurrency to periodically showcase impressive profitability.
Factors and Criteria to Consider when Choosing Altcoins
Before deciding to add a certain altcoin to their portfolio, investors should consider the following factors, criteria, and metrics:
- Market Capitalization, Liquidity, and Daily Trading Volume: Market capitalization is the total value of all the coins of a specific cryptocurrency that are in circulation. This is a key indicator of a coin's stability and growth potential. Typically, cryptocurrencies with larger market capitalization are seen as less risky investments. It is also important for an asset to have substantial daily trading volumes and to be liquid, meaning it's readily available for trading on numerous exchanges and platforms.
- Technological Advancements: Technological innovations can greatly affect the future success of a cryptocurrency. It's crucial to evaluate the features and technology of the coin. Consider the consensus algorithm, the level of decentralization, unique services, and security.
- Use Cases and Adoption: The more use cases an altcoin has, the higher the probability of its long-term success. Investors seek coins with a multitude of applications and collaborations, as well as a substantial and dynamically growing user base. These coins have the highest chances of successful implementation and value retention.
- Developer Team and Community: An active crypto community and a strong team of developers contribute to the success of any cryptocurrency. It's important to study the roadmap, channels of communication with the community, and their responses in order to gauge the coin's potential for further growth.
- Regulatory Environment: The impact or pressure from regulators, as well as the methods to counteract this, are significant indicators of success for altcoins. Investors should monitor the legal environment surrounding a specific altcoin in order to consider all risks and factor this into the evaluation of its potential.
By the way, you can check the altcoin season index using this link.
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