Altcoin Rotation Season — from A to Z
The altcoin rotation season is a periodic phase in the cryptocurrency market where liquidity systematically shifts from Bitcoin to altcoins. This phenomenon is not random or the result of temporary enthusiasm, but rather a logical outcome of changes in the structure of returns and risks within the market, and it typically occurs after strong upward waves for Bitcoin.
The story always begins with Bitcoin. In the early stages of any bull cycle, Bitcoin attracts the majority of liquidity because it is the most relatively safe, liquid, and clearly defined economic narrative. As the price rises and early investors realize significant profits, the expected returns from Bitcoin begin to decrease relative to the risks; this is where the search for higher 'alpha' begins.
At this moment, liquidity is gradually shifting to major altcoins like Ethereum and Solana, where these assets are relatively less inflated and more sensitive to new flows. Historically, we have seen this clearly in 2017 and 2021, where Bitcoin's dominance fell from levels around 70% to below 45% within months, coinciding with a significant increase in the market capitalization of altcoins.
As the rotation continues, the market enters a broader phase that includes mid-cap and small-cap coins. Here, trading volumes rise, correlations between coins increase, and sharp price movements appear. This phase is often the most profitable, but it is also the most dangerous, as liquidity becomes less stable, and any reversal in Bitcoin is magnified in altcoins.
Economically, what is happening is a repricing of risk. After Bitcoin becomes 'fully priced' in the short term, investors begin to bet on assets with higher volatility for potentially greater returns. This behavior reflects the mentality of traditional markets when capital shifts from defensive stocks to growth stocks in a high liquidity environment.
One of the key indicators used to monitor the altcoin season is the gradual decline of Bitcoin's dominance, the faster growth of the total market capitalization of altcoins compared to Bitcoin, and the increase in open trading volumes on altcoin pairs. However, caution is warranted, as some declines in dominance may be a result of the expansion of stablecoin supply rather than a real rotation.
The information that 99% of investors overlook is that the growth of stablecoin supply often precedes the real altcoin season. The increase in 'anticipated' liquidity within the market is an early signal of capital readiness to shift from Bitcoin to altcoins before price movements occur.
The question is whether the altcoin season is merely a recurring natural phenomenon, or if it is a profound reflection of a structural imbalance in the way risk is priced within an immature digital financial system.
