This year, the crypto market has experienced strange happenings around Bitcoin and alternative coins (altcoins). We saw the possibility of a coin being an outlier despite the surge in Bitcoin’s price. Likewise, DeFi and NFTs are massively adopted across the space. Amidst all of these, there is a hot argument about the existence of “Bitcoin seasons.”
For more than two weeks now, Bitcoin has kept holding the significant psychological price stand around $60,000. This initiated a noise in the crypto space about a phenomenon—Bitcoin season—holding. As much as there are disparities over its existence, it seems historical data keep establishing that it exists. The crypto community won’t stop receiving sentimental noise that we may be experiencing another “Bitcoin season.”
Bitcoin season can be referred to as the market window wherein money is directed back to the parent cryptocurrency — Bitcoin — until there is a change in the cycle due to interest waning from the coin. As a result, attention starts getting channeled back to alternative coins (altcoins).
Without a proper assessment of attention given to “Bitcoin season,” we may not be assured of its reality while it is happening. Meanwhile, we may be losing out on the benefits attached to the leverage during this season. But note that it is more of a psychological endeavor in the crypto world. To understand this better, industry experts and leaders answered a few questions from Cointelegraph.
Kadan Stadelmann, CTO of Komodo, confirmed the existence of Bitcoin season and referenced how it has a significant impact on the psychology of market participants. He revealed that for every new coin coming into the space, Bitcoin is a measure of security due to the little risk attached to it. And how retail purchases don’t often have an impact on its price. Instead, you need a whale order.
However, retail investors have a different perspective on the existence of Bitcoin in the market. This resulted from the immediate need of these individuals to take profits from altcoins that can flip 10X or 1000X returns despite the long-term risk associated with such altcoins. Thus, you can’t stop the market from transferring the profits back to a less volatile coin like Bitcoin when altcoin prices reach some levels.
Critical Assessment of the “Bitcoin Seasons” Narrative
From another insight into the narrative, Ross Middleton — Head of DiversiFi’s financial department —mentioned how most Bitcoin traders return to its haven while it sucks off the price of small tokens. This happens when Bitcoin is pulling the upward trend again.
However, there is a return trip to altcoins once there is a saturated Bitcoin price. The funds will flow back to altcoins, and it will all appear as if those coins were stealing from less volatile coins like Bitcoin and stable coins. Then, the cycle will rinse and repeat itself.
For another fresh and unique perspective of Bitcoin season, another argument presented that its existence can be tied to a primitive cause happening in the equities market. Wes Levitt — Theta Labs’ Head of Strategy—validated Bitcoin season as an established theory and mentioned how it encourages the sophistication of capital invested in crypto.
We can argue that the drive behind Bitcoin season is the innovation of new projects entering the crypto space. Take a critical look into the cycle. You will notice that money moves into the Bitcoin network during the bull season and start drifting to altcoins and other crypto projects like DeFi, non-fungible tokens (NFTs), and stablecoins. Innovation is only capable of causing such flows.
What’s the Conviction Level?
A reasonable percentage may hold this theory true and believe that Bitcoin season exists. But what happens to the other parts of the community that have a different view about Bitcoin season being real or an ordinary maximalist theory. One of those individuals that are not convinced about Bitcoin season is Nick Merten, CEO of Digifix and YouTube content creator of DataDash.
Nick argued otherwise that the philosophy may not always hold. He mentioned how this happened during the last cycle where altcoins outran Bitcoin. He opined that Bitcoin season might not last long due to the innovative opportunities that the altcoins may bring with them. This alone is enough to disrupt the Bitcoin bull run and render the season inactive.
Considering the altcoin cycle experienced in 2021, the crypto market hasn’t witnessed a true altcoin season. Although altcoin dominance resulted from the support level, it appeared as though we are experiencing alt season in 2021. Meanwhile, there is a possibility that altcoin may dominate about three-quarters of the crypto market due to DeFi projects and other layer-one (L1) protocols that may surface.
Another anonymous industry leader shared a view that the evidence does not validate the reality of Bitcoin season. His proposition admitted that Bitcoin has about 40% of the crypto market. It is only natural for its price to surge when new members enter the market due to the global adoption. This price surge occurred as a result of its limited market supply.
Will the Bitcoin Cycle Come to Halt?
With a critical examination of technical indicators, anyone would agree that we may be in another Bitcoin season. Anyone can guess that. Although, some tokens will keep receiving money flow amidst any cycle. Their performance will hold despite the overwhelming impact of Bitcoin. Shiba Inu (SHIB) is an example of a token that will hold firm and be favored.
On the other end, we may experience more money flow between other coins instead of how it has been happening between Bitcoin and altcoins. This will occur because of the Bitcoin exchange-traded funds (ETFs) launch, institutional participation, and incorporation of NFTs in the artwork industry. As a result, there will be enhanced liquidity across the market.
However, the positive performance of coins such as Chainlink (LINK) and Shiba Inu (SHIB) does not indicate that the Bitcoin season will end very soon. The opposite may happen as much as we have ongoing institutional adoption. That explains how you can’t predict the crypto space with coins like SHIB.
There may be difficulty predicting the end of a Bitcoin cycle and the beginning of another alt season. That’s because Bitcoin may start doing well, and altcoins may behave accordingly well during this season. However, there will always be outliers inspired by whale market participation.
The Unpredictable Future?
We can agree that the crypto market has matured beyond its scope over the decade. Aside from the Bitcoin season postulation, the narratives are changing in the space. Funds are not only swapping between Bitcoin and altcoins. We now witnessed an era where DeFi and NFTs function as a separate ecosystem in the crypto space.
Due to the increased number of altcoins, it is difficult to predict the market’s direction. Instead, we can only leverage factors surrounding the creation and adoption of altcoins to register our possibilities.