Is Alt Season really here? The core secret behind the rotation in the crypto market

December 2024, the crypto market is at a critical juncture. Bitcoin hovers around the $100,000 mark, institutional investors are pouring in continuously, and policy directions are beginning to turn friendly. Against this backdrop, everyone is asking one question: Will alt season (token rotation season) be far behind?

What is Alt Season, and why is it worth paying attention to?

Alt season is essentially a market phenomenon: when mainstream tokens (especially Bitcoin) slow down in gains or even stagnate, capital begins to flow massively into other crypto assets. This is not just a simple price increase but a shift in the entire market’s risk appetite.

The traditional understanding of alt season is: when Bitcoin’s dominance drops below 50% from a high, it marks the start of rotation. But 2024’s situation is more complex.

According to on-chain data analysis, liquidity in stablecoins and the entry of institutional capital have become key factors in determining the trend of alt season. This means that instead of focusing solely on the flow of funds between Bitcoin and tokens, it’s more insightful to watch the activity in trading pairs of stablecoins like USDT, USDC—these reflect real demand.

Current situation: signals that Alt Season has already begun

As of December 2024, several data indicators are flashing green:

Altseason Index has risen to 78 (from Blockchain Center’s real-time monitoring). Typically, above 75 indicates the market has entered a rotation phase—most mainstream tokens have outperformed Bitcoin.

Bitcoin’s dominance continues to decline. From around 70% at the start of the year, it has gradually weakened. This decline often signals that capital is starting to seek more investment directions.

Ethereum’s performance relative to Bitcoin (ETH/BTC ratio) is rising, which is usually a precursor signal for broader alt season. Ethereum leads, and other major public chains and projects tend to follow.

The total market cap of global crypto has surpassed $3.2 trillion, exceeding the all-time high of 2021. This scale of growth indicates not only a rotation of existing funds but also continuous inflow of new capital.

Evolution of Alt Season: from “rotation” to “ecological prosperity”

To understand the current alt season, one must see how it has evolved.

2017-2018 ICO wave: The driving force was speculative capital flowing directly from Bitcoin into newly listed tokens. Bitcoin’s dominance plummeted from 87% to 32%, market cap soared from $30 billion to $600 billion, and finally collapsed under regulatory crackdowns. This was the most “pure” rotation—completely driven by speculation.

2021 DeFi + NFT cycle: The logic upgraded. Although still a rotation, it was driven by real ecological demand—lending protocols, liquidity mining, digital art concepts attracted many new users. Bitcoin’s dominance fell from 70% to 38%, and market cap reached $3 trillion.

2024’s new phase: The current rotation reflects market maturity. Stablecoin liquidity support, institutional participation, and multiple tracks exploding simultaneously make alt season no longer just “chasing hot investments” but a differentiated structural market.

Who will win in this round?

If you’ve been paying attention to recent market trends, you’ll notice not all tokens are treated equally.

AI sector emerging strongly: Render, Akash Network, etc., surged over 1000%. The logic is the real demand for blockchain combined with AI is being released—applications like computing resources and model training are being implemented.

GameFi revival: ImmutableX, Ronin platforms attract game developers and players. Rather than hype, it’s an exploration of blockchain in the gaming industry.

Meme coins evolving: Early meme coins were just jokes, but now many projects incorporate AI, community building, and practical features. These assets are especially active in the Solana ecosystem, boosting the value of the entire public chain ecosystem.

Future potential of DePIN (Decentralized Physical Infrastructure): This is a relatively unfamiliar but promising track, with multiple projects already underway.

Since October 2024, the market has shown clear differentiation in these directions. Tokens with real applications and community foundations continue to strengthen, while pure speculative assets carry high risks.

Four stages of liquidity flow in Alt Season

Understanding the pattern of capital flow helps better grasp trading opportunities.

Stage 1: Bitcoin accumulation
Funds first favor Bitcoin, pushing its price up. At this stage, Bitcoin’s dominance is still rising, and other tokens are relatively ignored. Performance: BTC trading volume hits new highs, while the altcoin market remains quiet.

Stage 2: Ethereum initiates
After Bitcoin’s gains slow down, capital shifts to Ethereum. ETH/BTC ratio rises, DeFi protocol TVL increases. This signals the true start of rotation.

Stage 3: Mainstream tokens follow
Projects like Solana, Cardano, Polygon with established ecosystems begin to strengthen. Market focus shifts from “price” to “technology” and “ecosystem.”

Stage 4: Small-cap tokens explode
The riskiest assets enter last. Bitcoin’s dominance drops below 40%, market sentiment is highly speculative. This phase is often the riskiest—bubbles form, and it’s vulnerable to rug pulls, pump and dump schemes, and other frauds.

How to identify the true arrival of Alt Season?

Don’t just look at Bitcoin dominance alone. A combination of the following signals indicates the real Alt Season:

Increased activity in stablecoin trading pairs—reflects genuine trading demand, not just price manipulation. Large trading volume in USDT, USDC pairs with various tokens signals real capital inflow.

Concentrated gains in specific sectors—over the past two weeks, AI tokens, GameFi, meme coins, etc., with over 20% gains. Sector rotation often precedes a full-blown alt season.

Social media buzz changes—though seemingly “virtual,” it reflects retail participation. When hot topics shift from “Bitcoin how high” to “what about this project,” rotation is underway.

Institutional movements confirmation—watch for public statements from large funds and exchanges. When giants like BlackRock, Fidelity enter assets beyond Bitcoin, it’s a strong signal.

Liquidity indicators change—monitor order book depth, volatility on exchanges. Mid-stage alt season shows clear signs of liquidity shifting from BTC to altcoins.

Lessons from history: how did the last Alt Season unfold?

The 2021 case is most instructive.

In early January, Bitcoin’s dominance rapidly fell from 70%. Around March, Ethereum broke $1500, and DeFi projects like Uniswap, AAVE surged. The “May 19 crash” was just a hiccup; afterward, rotation accelerated—both institutions and retail saw it as a good bottom-fishing opportunity.

By mid-year, total locked value (TVL) in DeFi jumped from $5 billion to over $10 billion. Meanwhile, the NFT market became a black hole for money, with NBA Top Shot, Bored Apes creating returns of dozens of times.

The characteristic of this cycle was: mature infrastructure led to multi-point application growth. It wasn’t just a single project booming but the entire ecosystem heating up.

The 2018 ICO collapse and the 2021 recovery both prove a principle—when rotation is backed by real demand, it can go further.

Trading strategies: how to operate during Alt Season?

Research is fundamental, not optional

In rotation markets, asymmetric gains are maximized, but risks are also high. Before buying any token, do your homework:

• Does the project have innovative technology?
• What’s the team background and funding history?
• Community activity and real-world use cases
• Is the tokenomics reasonable (avoiding excessive pre-mine or private sale proportions)?

Projects that look hot on Twitter but have poor fundamentals often signal a rug pull.

Diversify risk, not just diversify investments

“The eggs in one basket” rule is especially crucial during alt season. But diversification isn’t about equal allocation; it’s about risk tiers:

• 40% into proven mainstream chains and DeFi protocols (ETH, Solana)
• 40% into leading projects within hot sectors (top AI tokens, top GameFi)
• 20% into exploratory small-cap projects with real innovation but less market recognition

This way, you participate in rotation gains while limiting losses from project failures.

Set stop-loss and take-profit levels, and stick to them

The most common tragedy in alt season is: after earning 50%, you don’t sell, expecting 100%, but a “black swan” causes a 30% loss.

Recommended approach:

• Set stop-loss (usually 10-15% below purchase price)
• Take profits in stages (sell one-third at 20% gain, another third at 50%, let the last third ride with the trend)
• Set psychological profit targets (e.g., “sell everything after 100% gain”)

It sounds mechanical, but in emotional markets, discipline is often more valuable than genius.

Monitor policy windows

The biggest variable now is regulation. The friendly stance of the Trump administration has already driven a rally, but policies may fluctuate. Key points to watch:

• SEC’s attitude toward token classification
• New regulations from various countries
• Public statements from key figures

A regulatory positive can catalyze a sector’s rise; a negative can reverse rotation.

Real risks in Alt Season, not just scare tactics

Volatility far exceeds Bitcoin

Altcoins often fluctuate twice as much daily as BTC. Even if your judgment is correct, a mid-term dip can shake you out. Traders using leverage are especially vulnerable to liquidation.

Liquidity traps

Some small-cap tokens surge sharply but have shallow trading depth. When you try to sell, you may find you can’t sell as much as intended—either the price drops significantly or no buyers are available. This liquidity dilemma is most common in late bull markets.

Fraud and insider trading

Alt season attracts many malicious actors. Rug pulls, pump and dump schemes, false publicity are rampant. Even seemingly professional projects may hide risks.

Regulatory sudden changes

A country suddenly banning crypto trading or a major token being investigated by SEC can trigger a market crash within hours. Such black swan events are unpredictable but can be mitigated by avoiding excessive leverage and diversification.

Psychological traps

When everyone around is getting rich from a token, FOMO (fear of missing out) can lead to impulsive decisions. Conversely, when markets turn, fear amplifies losses. Overcoming these psychological pitfalls requires experience and strict discipline.

How does the regulatory environment influence Alt Season?

Historically, regulatory shifts often mark the turning point of alt season.

2018 ICO crackdown: When governments suddenly imposed strict controls on ICOs, it quickly ended the 2017 alt season. Many projects turned into worthless tokens, causing heavy losses for investors.

2021 recovery: When regulation shifted from “ban” to “regulate,” the market regained confidence. The US proposed stablecoin regulation frameworks, and the EU introduced MiCA legislation (which only started implementation in 2024). These “tight” policies clarified rules and actually benefited the market.

Current opportunities: After Trump’s election, market expectations for crypto-friendly policies increased. If the US indeed adopts a more friendly regulatory framework, it could be a major catalyst for the next alt season. Conversely, unexpected crackdowns (like bans on certain tracks) could cause rapid rotation reversals.

Lesson: Monitoring policy changes isn’t just for short-term speculation but for understanding long-term trends. Clear regulation often benefits the market, while uncertainty breeds panic.

Trading tools and methods during Alt Season

Spot trading: the most direct but also the most demanding on insight

Buying promising tokens and holding is the simplest way to participate. But it requires genuine understanding of projects; otherwise, it’s gambling. Suitable for investors with research ability and risk tolerance.

Lending and liquidity mining: enhance yields but increase complexity

On DeFi platforms, you can lend tokens for interest or participate in liquidity mining. During alt season, yields often hit new highs (due to risk premiums), but risks are higher—smart contract bugs, platform risks, etc., can cause losses.

Derivatives trading: high risk, high reward

Futures, options, and other derivatives can amplify gains, but in high-volatility environments, leverage can lead to liquidation. Only for those with professional risk management skills.

Index and fund products: lazy approach

Some crypto funds track alt season indices, saving you from selecting individual tokens. Suitable for those who don’t want to research too much, but management fees will reduce returns.

Final thoughts: how long will Alt Season last?

Historically, a full alt season lasts about 3-6 months. Since October 2024, over two months have passed, so from a timing perspective, rotation may continue for some time.

But duration depends on several factors:

• Bitcoin’s performance: If BTC continues to surge, funds will refocus on BTC, ending rotation. If BTC remains sideways long-term, rotation can persist.
• Regulation and macroeconomics: Major policy shifts or economic downturns can cut short rotation.
• Market sentiment turning point: When retail FOMO peaks, exchange user growth slows, and mainstream media start to bearish, it often signals the end of rotation.

Final advice

Making money during alt season isn’t about chasing maximum gains but surviving and coming out ahead.

Control what you can: choose projects with fundamentals, diversify risk, set stop-losses, avoid excessive leverage. Be aware of uncontrollable risks: regulation, black swans, sentiment shifts.

Research projects, understand markets, maintain discipline—doing these well already puts you ahead of 90% of participants. How much you can earn depends on luck and timing, but at least you won’t lose badly.

Alt season exists, and opportunities are real. But remember: markets have no free lunches—only a combination of knowledge, discipline, and a bit of luck.