Must be the Season of the Alts, Yah!
In general, when Bitcoin stagnates it gives altcoins a chance to run. The Bitcoin stagnation that started in December 2017 set the stage for an altcoin boom like few before it.
With that said, you’ll note I said “like few before it” and not “like never before.” This important subtlety is the key to the points I’ll make below (both positive points about crypto, alts, and Bitcoin, and points of caution about the potential of the good times not lasting forever).
First the happy part!
From November to January, coins like Cardano (ADA), Ripple (XRP), Stellar (XLM), and countless others rose as much as 2,000% against Bitcoin! That means they outperformed Bitcoin’s year in a matter of weeks. If you thought Bitcoin’s rise was meteoritic, then this was like meteors with rocket boosters.
That is scary and exciting. Exciting because $$$, exciting because it shows alts are still a force (especially good to confirm as cryptocurrency grows in popularity), exciting because it shows if you time your alt buy wrong you can sit on it for a year and then make all your gains back in a few good weeks (if history repeats), scary because… in crypto we see 20% – 80% corrections all the time, and they can come on quick.
No one wants to see their $3.00 coin go to $.30 cents. Even if they think it’ll go to $6 in a year. No one wants to spend a year waiting while they watch Bitcoin do its 100%+ jump (just like Bitcoin investors probably didn’t want to watch their Bitcoin go from $20k to $10k while other coins surpassed a year’s worth of growth in just weeks).
The thing is, if you don’t want to watch these events unfold in real time and be on the wrong side of them, you need to start planning for potential future events. If you want to plan for future events, you need to understand the historic relationship between Bitcoin and alts (where alts fund Bitcoin runs, and Bitcoin funds alt runs, and for this reason and more Bitcoin runs tend to suppress alts while Bitcoin stagnation let’s alts run).
Luckily, we can plan for possible future worlds, because we have historic charts and the general history of the market to study.
We can see that, for example, alts boomed in Sept. 2013, Dec. 2014, and May 2017 while BTC struggled! And, we can see that they rose in value against BTC in epic proportions in these times. If we look at the pattern, we can see that there is 1. room for growth, 2. room for a correction, and 3. that what happens could depend on what Bitcoin does.
We can see that when Bitcoin stagnates alts can make their gains of the year in only a few weeks, so we want to be in alts for those weeks. However, we can also see that when Bitcoin takes off, it can leave alts behind for weeks or months! If it takes off quickly, alts can lose money quick and exchanges can start to freeze up!
We can wait until the event, or we can hope that the better case (where Bitcoin and alts move up in lock-step) occurs, or we can plan for any event and have our strategy worked out before hand.
We can set stops and place limit orders (essentially automating our strategy), we can plan to hold long and build an average position, we can hold both alts and Bitcoin and let the market work itself out. There are a thousand valid moves. The only move that is dangerous really is buying a lot in a short window of time after an epic run and then expecting the good times to continue for ever.
When we become focused on one coin, and we decide it is the new Bitcoin, and that the game of thrones is over. That is when we start down a path with very few options.
The problem with the fickle cryptocurrency market is that it changes moods with the weather… and as quickly as we see alts make epic gains and become red hot darlings of the internet, we can see them give a portion of those gains back, become bearish, and see our internet friends move on to another shiny object.
One “season” we see Bitcoin run without stopping, often suppressing altcoin growth. September to November was like this, only a few alts here and there made any gains against BTC in a given week.
One season we will see top alts with lower supplies rise, we saw Litecoin, Bitcoin Cash, and Ethereum all rise at at the very start of December 2017.
One season we will see high supply / low cost coins rise (that is happening right now with XRP, XLM, ADA, XEM, etc).
Then, when that season is over, we can tend to see the correction. We see LTC go from $400 to $250. We see BTC go from $20k to $13.5k. We potentially see Ripple, Stellar, Cardano, and New Economy movement follow suit (they have done phase 1… will phase 2 be a correction as it so often is? I don’t know the future, I only know the past. The past says a correction will come, future is unknown).
Now, sometimes we get a quick recovery, like with Ether where we saw it go from $850, to $650, back to $900. However, other times we just see a dip. Sometimes that dip is then followed by a bear market.
After a hard dip and a long bearish market, it can sting a little to be holding a coin you bought at an all-time-high. There are many ways to protect agains this, but you have to plan ahead!
The bottom line here is that when a coin has been bearish for a while, or when it is new, we can find these periods where it preforms really well against BTC. This can make us think our favorite coin is the new Bitcoin. Likewise, when Bitcoin stops being epic and gets bearish, this can make us think the future is in alts. However, the history of the market is not so kind or cruel to anyone, instead it is more fickle. The history of the market says, no coin is the new bitcoin, the favorites will rotate with the weather. Further, the more they heat up, the more they risk a correction when the weather changes!
So what event could change the weather here? Well, the most likely one is Bitcoin breaking out of its current zone and surpassing its all-time-high (that is very likely to suppress alts, we’ve see a few tastes of that when Bitcoin started running already).
Think about it, there isn’t necessarily enough fait money to propel Bitcoin past $20k in the market, but there is more than enough value stored in altcoins to do this. It is a real possibility that altcoins will be the rocket fuel that takes Bitcoin to new heights, we have seen it before, its compeltely logical.
Patterns don’t have to repeat in crypto, but crypto loves patterns. After-all, crypto traders are humans. Those humans bring coins up when they get hot, but those same humans take profits to BTC and ETH and USDT and Fiat after a run.
The season of the alts might continue, the future might belong to alts, no one knows. However, if we don’t try to guess the future and just analyze the past, then we can see some patterns. Those patterns tell us that the good times don’t last forever. Thus, it is wise to have a sober plan B that doesn’t include the words “bullish, moon, infinity, and lambo” in it (unless its “I should stop being so bullish and talking about the moon, the coins probably won’t go to infinity, if I don’t set stops I won’t be able to afford that lambo”).
If you thought Bitcoin was a bubble because it went 1,000%, but then you held Ripple up 2,000%, where is the logic in that? FOMO drives us to buy and hold at the top. There is always a top. It doesn’t have to be at 2,000% (I mean just look at crypto from day 1 to today, a coin can go 100,000%+ over time).
The point here isn’t to say “panic sell now,” the point here is to be cautious and keep in mind that locking in gains isn’t the worst idea if you are playing some coins that just ran short or if you just bought in recently (if you are holding x-alt since .20 cents and are going long, there is wisdom in letting it ride of course, the plan B is more for those who bought at $2.25 and now have some decent gains).
The bottom line here:
Enjoy the season, build and hold long positions (where you don’t care what happens over months, just over years), but for short term and medium term plays… try not to fall into that trap where you think what is happening now defines how it will always be forever.
If BTC breaks out of that $16k zone, then heads to $19k and breaks that, then past $20k the chances that altcoins will keep doubling and making everyone on-paper rich diminishes. Look at Litecoin. It saw $400 from $100 (a solid 400% run), now its at $225 (nearly a 50% correction). If you don’t think that can happen to your crypto, if you don’t think you can see another bear market like we have in the past, then you are banking on history not repeating. That is a dangerous game to play.
For now, be bullish on those low cost high supply top alts, and take risks on those up-and-comers… but don’t put it all on black and assume the future will look exactly like it looks now forever. Instead, the future is likely to look like a range of different seasons we have already seen repeat in the short history of cryptocurrency trading. If altcoin traders don’t shed a few tears shortly, then cryptocurrency has entered a new stage where everyone wins all the time and no one ever losses on-paper money for a season… that doesn’t sound like the crypto market I know, heck it doesn’t even sound like the stock market, I wouldn’t bank on that. Have your plan B ready and then you have lots of room to enjoy the show. 🙂