Altcoin Season and Cycles of the Crypto Market: How to Trade Altcoins During a Rally

The cryptocurrency market develops in waves, and one of the most interesting phases for investors is the altcoin season. This period is characterized by a strong rise in alternative cryptocurrencies, as capital flows from Bitcoin and attracts both experienced traders and newcomers. But what truly drives the altcoin season in 2025-2026? And how can you profit while minimizing risks?

Unlike previous cycles, the modern altcoin season is fundamentally different. If before it was simply a matter of rotating capital from BTC into altcoins, now it’s a much more complex mechanism. The influx of institutional capital, the expansion of stablecoin liquidity, and the emergence of new sectors (AI, GameFi, meme coins) have redefined market dynamics. Understanding these changes is key to successful trading.

Borderless Market: What Drives the Altcoin Season Today

As of early 2026, the crypto market is full of expectations. After Bitcoin’s fourth halving, approval of spot ETFs for BTC and Ethereum, and favorable regulatory signals from the US — conditions for a strong altcoin season are perfectly aligned. However, the mechanism behind this phenomenon has undergone significant changes.

Previously, the altcoin season was triggered simply: Bitcoin’s price stabilized, and investors started seeking returns in altcoins. Today, it works differently. According to Ki Young Ju, head of CryptoQuant, the decisive factor is not just outflows from BTC, but the growth in trading volumes of altcoins against stablecoins (USDT, USDC). This indicates that new genuine investors are entering the market, rather than just existing capital shifting around.

Tom Lee from Fundstrat emphasizes: institutional investors have begun perceiving altcoins as a separate asset class. Activity around Ethereum is especially noticeable, often leading the altcoin season. As major players like BlackRock expand their portfolios, demand for diversified cryptocurrencies increases.

When Does the Altcoin Season Come: Key Signals for Traders

How can you tell if the altcoin season has started or is about to begin? Analysts highlight several key signals:

1. Bitcoin Dominance Decline

Bitcoin dominance index — the share of Bitcoin’s market cap in the total crypto market cap. When this index drops below 50%, it’s a reliable altcoin season signal. According to Rekt Capital, a sharp decline below 40% usually precedes explosive growth in altcoins.

2. ETH/BTC Ratio

Ethereum often leads altcoins. When ETH’s price outpaces BTC (i.e., ETH/BTC ratio rises), it indicates a shift of capital from Bitcoin to the rest of the market. Rising ratio — a sure sign of an upcoming altcoin season.

3. Altseason Index from Blockchain Center

This tool measures the performance of the top 50 altcoins relative to Bitcoin. A value above 75 indicates a full-blown altcoin season. As of late 2024, the index rose to 78, confirming that the market was already in altcoin season territory.

4. Growth in Altcoin Trading Volumes

An increase in trading volumes in altcoin-stablecoin pairs is not just speculation; it’s a sign of fresh capital entering. When trading volumes in sectors like AI coins, GameFi, meme coins grow by 40-100%, it often leads to a significant increase in their overall market capitalization.

5. Social Attention and Trends

Retail investors often lead the charts. When specific altcoins are actively discussed on social media, when new memes and trends emerge — it signals growing interest. But don’t rely solely on social sentiment.

From Bitcoin to Ecosystem: How the Altcoin Season Evolved

Past altcoin cycles reveal a fascinating evolution.

2017-2018: ICO Era

The first major altcoin season was linked to the ICO boom. Bitcoin’s dominance dropped from 87% to 32% within months. New projects like Ethereum, Ripple, Litecoin, and hundreds of others appeared amid hype. Total crypto market cap soared from $30 billion to over $600 billion. But regulatory pressure and the collapse of many projects quickly ended the boom.

2021: DeFi, NFTs, and Memes

Early 2021 brought a new altcoin season. Bitcoin’s dominance fell from 70% to 38%, while altcoins’ share rose from 30% to 62%. This time, driven by decentralized finance (DeFi), non-fungible tokens (NFTs), and meme coins. Projects like Uniswap, Aave, Doge, Shiba Inu showed multi-fold growth. Crypto market cap hit record highs of over $3 trillion.

2024-2026: Institutional Involvement and Diversification

The current cycle is fundamentally different. Approval of spot Bitcoin ETFs in 2024 led to massive institutional participation. Over 70 spot BTC funds were approved, opening the door for pension funds and corporate portfolios.

New drivers of the altcoin season include:

• Stablecoin Liquidity: USDT and USDC create deep liquidity pools, making altcoin trading more convenient and cheaper.

• AI Coins: Render (RNDR), Akash Network (AKT), and other projects at the intersection of AI and blockchain have grown over 1000%.

• GameFi: Platforms like ImmutableX (IMX) and Ronin (RON) attracted both gamers and investors.

• Memecoins 2.0: DOGE, SHIB, BONK, PEPE, WIF grew over 40% and evolved by adding real utility.

• Expansion Beyond Ethereum: Solana (SOL) became a second home for memecoins and DeFi projects, breaking out of the “dead chain” status.

This diversification shows that the altcoin season has become a more mature phenomenon, driven by innovation rather than mere speculation.

Capital Flow Phases: Predicting the Altcoin Season

Historically, the altcoin season unfolds in four phases. Understanding this cycle helps traders position themselves correctly.

Phase 1: Bitcoin Dominance Stabilizes

Bitcoin is in a sideways trend, with its dominance index above 50-60%. Capital concentrates in BTC as the safest asset. Altcoins stagnate. This is a accumulation phase for patient traders.

Phase 2: Ethereum and Major Altcoins Wake Up

Capital begins flowing into Ethereum. ETH/BTC ratio rises, DeFi volumes increase. Large altcoins like Solana, Cardano, Polygon show double-digit growth. This signals that the altcoin season is near.

Phase 3: Wave of Mid-Cap Projects

The market starts noticing promising mid- and small-cap projects. This phase often yields the highest returns for risk-tolerant portfolios.

Phase 4: Full Altcoin Season and Speculative Peak

When Bitcoin’s dominance drops below 40% and the altseason index exceeds 75, a rally begins. Even small projects show parabolic growth. This is a period of maximum volatility and opportunity (and risk).

Trading Strategies During Altcoin Season: Risks and Opportunities

Trading during altcoin season can be profitable but requires discipline. Here are practical tips:

Research Before Entry

Don’t fall for hype. Before investing in an altcoin, study:

• The development team and their background
• The project’s technology and real-world use cases
• Tokenomics and distribution
• Competitors in the sector

Remember, even during altcoin season, not all projects survive.

Diversify Across Sectors

Don’t put everything into one meme coin or one AI project. Divide your portfolio:

• 40-50% in large-cap altcoins (Ethereum, Solana, major DeFi projects)
• 30-40% in mid-cap projects with clear utility
• 10-20% in high-risk altcoins (if you’re prepared to lose them)

Use Stop-Losses

Altcoin volatility can be brutal. Crypto analyst Doctor Profit emphasizes: “Without proper risk management, profits quickly turn into losses.” Set stop-losses at 20-30% below entry.

Take Profits Gradually

When an altcoin grows 100-200%, don’t wait for the top. Take half profits and let the rest run. This guarantees gains in case of sharp corrections.

Avoid Leverage Without Experience

Margin trading can double gains but also losses. For beginners, spot trading (buy-and-hold) is safer.

Monitor Regulatory News

Favorable regulatory signals (like ETF approvals) stimulate the altcoin season. Unexpected restrictions can cause crashes. Keep an eye on news from the US, Europe, and Asia.

Main Risks of the Altcoin Season

Despite opportunities, dangers are real:

Excessive Volatility

Altcoins can drop 50-70% in a week. If you’re not psychologically or financially prepared for such swings, it’s better to limit your position size.

Fraud and Rug Pulls

Especially during hype, fake projects appear. Developers raise funds and disappear. Check:

• Transparency of the team (real names, experience)
• Smart contract audits (security reviews)
• Presence of real technology, not just promises

Pump-and-Dump Schemes

Large holders sometimes coordinate price surges to sell at the top. Be cautious with low-liquidity altcoins and avoid risking large sums.

Overleveraging

Don’t trade money you can’t afford to lose. Use only a portion of your portfolio that won’t threaten your financial stability if lost.

Where to Trade Altcoins: Platform Selection

For trading altcoins, choose a reliable platform with:

• A large selection of coins (ideally 500+)
• Low fees (0.1-0.5%)
• Good liquidity
• Advanced tools (spot, futures, bots)
• Strong security standards

Check the platform’s reputation, reviews, insurance options, and history of security breaches before committing.

Conclusion: Altcoin Season as a Diversification Tool

The altcoin season is a real opportunity to grow your capital, but it doesn’t come with guarantees. The key to success:

1. Understand the mechanics: Know what drives the market — from Bitcoin dominance decline to stablecoin flows.

2. Identify signals: Monitor the altseason index, ETH/BTC ratio, and regulatory news.

3. Manage risks: Diversify, use stop-losses, and take profits.

4. Keep learning: The market evolves rapidly. New sectors like AI, GameFi, and memecoins constantly emerge.

5. Psychological readiness: Altcoin volatility tests nerves. Be prepared for drops and avoid panic.

Altcoin seasons occur periodically, but those who are prepared and understand market mechanics can profit significantly. The main thing — stay disciplined and remember that every market rise may be followed by a correction.