Bitcoin analyst Max Keiser believes that the cryptocurrencies are about due for a price boom, which he calls “Bitcoin season.” What impact will this have on the market?
The “bitcoin maximalist meme” is a theory that Bitcoin is going through a season of growth. The theory has been around for some time now, and it seems to be gaining more traction as the price of Bitcoin continues to rise.
A increasing chorus of voices seems to be repeating the idea that the market may be in the middle of another “Bitcoin season,” with Bitcoin (BTC) continuing to maintain ground above the all-important $60,000 psychological level for two weeks in a row.
This refers to a period of time during which money flows from numerous altcoins back into the flagship cryptocurrency until interest begins to dry up and capital begins to flow back into alternative altcoins.
Cointelegraph reached out to Kadan Stadelmann, chief technical officer of Komodo, an open-source technology provider, to see whether such a concept exists and is worth paying attention to. According to him, the Bitcoin season phenomena is quite genuine and seems to have a significant impact on market psychology, adding:
“Because Bitcoin is the market cap leader, it seems to be a’safe option’ for new institutional money entering the field.” It is less hazardous, but it also has a lower probability of huge profits since it takes a large number of large whale purchases to move the market in either way.”
According to Stadelmann, the overall perspective for retail investors is somewhat different, since the bulk of these people are seeking for cryptocurrencies that can give 10x or 100x returns, even though the concept is significantly riskier in the long run. “When altcoins reach a certain price level, gains will inevitably migrate back into less volatile cryptocurrencies like Bitcoin or stablecoins,” he continued.
A look at the “Bitcoin season” story
When Bitcoin begins to rise, according to Ross Middleton, chief financial officer of decentralized cryptocurrency trading platform DeversiFi, it “sucks the oxygen” out of smaller tokens, causing most traders to return to Bitcoin.
Traders then begin to rotate back into altcoins after Bitcoin begins to level out, until the flow of money becomes so enormous that they are essentially bid-stealing from larger tokens. “As over-leveraged traders are liquidated, Bitcoin generally drops significantly. Then the cycle repeats again, with Bitcoin steadily rising again,” Middleton said.
Wes Levitt, head of strategy at Theta Labs, the firm behind the blockchain-powered video streaming network Theta, told Cointelegraph that the Bitcoin season idea is legitimate and may be regarded a rudimentary version of sector rotation found in the stocks market:
“The fact that we’re seeing even more granular cycles across various crypto sectors — such as between DeFi [decentralized finance], Layer-one protocols, exchange tokens, and so on — is a positive indicator, as it indicates that the money pouring into crypto is getting more intelligent.”
Katherine Deng, vice president of cryptocurrency exchange MEXC Global, told Cointelegraph that she shares a similar viewpoint, namely that money initially flows into Bitcoin during bull cycles, before moving on to altcoins, nonfungible tokens (NFT), GameFi, DeFi, and even stablecoins. “Innovation, or we could say micro innovation in this bull market like COMP introducing liquidity mining or AXS joining the play-to-earn market, is driving these flows,” she said.
Not everyone believes it.
Despite the fact that there are moments when Bitcoin’s dominance grows and altcoins lose momentum, Nick Merten, CEO of crypto trading platform Digifox and founder of the crypto-centric YouTube channel DataDash, told Cointelegraph that he does not pay attention to such tales. He elaborated on his position by saying:
“Altcoins usually surpassed Bitcoin in the previous cycle, as well as this one.” It’s difficult to justify staying primarily in Bitcoin during bull markets, given the magnitude of the industry and the fact that there will always be fresh interesting chances inside the altcoin market. The ‘Bitcoin season,’ in my view, is not going to endure.”
He went on to say that the market has yet to experience a true alt season, despite the fact that the dominance of cryptocurrencies has grown or maintained its overall support levels very well throughout 2021. “In this cycle — that is, between the maturation of DeFi and developing layer-one protocols,” he continued, “my view is that altcoin dominance will continue to climb towards 75 percent.”
A spokesman for Binance, who did not want to be identified, has a similar viewpoint. They told Cointelegraph that there isn’t enough data to back up the notion of a Bitcoin season, adding:
“Because Bitcoin accounts for more than 40% of the market, when it rises, it gets a lot of attention, and some money may opt to rotate into it or out of it. As the worldwide acceptance of cryptocurrency accelerates, more money and individuals are flocking to the market. Because of its limited quantity, the price of Bitcoin will rise as more individuals acquire it.”
When will the current Bitcoin cycle come to an end?
Deng believes that it is anyone’s guess when the current Bitcoin bull run will come to an end, and that technical signs imply that we may currently be in the midst of a cycle. She went on to say that altcoins like Shiba Inu (SHIB) are doing well during this current run, demonstrating that even in a Bitcoin-dominated market, money will continue to flow into alternative products. Deng said,
“There is enhanced liquidity in the overall market with the debut of Bitcoin ETFs [exchange-traded funds], increasing involvement of numerous major firms, and the growth of the NFT artwork sector.” Rather than a single cycle between BTC and alts only going up, we may see more sophisticated moves between currencies.”
Levitt thinks that just though other altcoins are doing well at the present, such as Chainlink (LINK) and SHIB, the current Bitcoin cycle will not stop anytime soon, and that as long as institutional money and adoption continue to rise, the current trend will continue.
“Attempting to anticipate the S&P 500 based on how GME has been trading is a bit like trying to predict the status of the crypto market by watching SHIB,” he joked.
Stadelmann also feels it’s difficult to predict when a Bitcoin cycle will finish and a new alt season will begin, particularly since anytime BTC performs well, the whole market follows suit. He did admit, though, that there are always some outliers, many of which are caused by whale buildup. In this respect, he stated:
“On September 23, it was revealed that all 50 trillion SHIB contributed for India’s Crypto Covid Relief has been sold for USDC [USD Coin].” This alleviated concerns of a similar-scale market sell-off. On September 30, a huge purchase of 6 trillion SHIB (worth about $270 million) was made. This implies that the ‘Bitcoin season’ and ‘altcoin season’ narratives do not apply to each cryptocurrency.”
The future is still uncertain.
There’s no doubting that the crypto industry has developed significantly in recent years, which Binance’s aforementioned spokesman says has resulted in the emergence of additional narratives beyond the Bitcoin season idea. They argue, for example, that in addition to money moving in and out of Bitcoin into other altcoins, the DeFi market and NFTs have begun to act as autonomous entities.
Finally, they said that since the number of cryptocurrencies continues to rise with each passing day, it is impossible to anticipate where the market will go in the short to mid-term.
“Like other asset classes, distinct crypto sectors now perform differently depending on a variety of criteria. It’s tough to make generalizations about altcoins since there are so many of them, and we can’t always forecast where they’ll go.”
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