As Bitcoin (BTC) continues to stay above the $ 60,000 psychological cap for two straight weeks, the growing vote seems to reflect the feeling that the market may be heading for a new bitcoin season.
Basically, it refers to a time window where funds flow from different altcoins to the mainstream cryptocurrency until the interest rate finally starts to dry up and capital moves back to other altcoins.
To assess if the idea really exists and if it deserves attention, Cointelegraph contacted Kadan Stadelmann, CTO of Komodo, an open source technology provider. In his opinion, the Bitcoin season phenomenon is very real and seems to have a significant impact on the psyche of the market, adding:
For new institutional money coming into the room, Bitcoin seems to be a “safe bet” as it is the market leader. This is considered less risky, but it also has a lower likelihood of making high profits, since it takes a lot of large whales to be bought in order to influence the price in both directions. “.
Stadelmann went on to say that for retail investors, their overall outlook is somewhat different because most of these people tend to look for alternative coins that can generate 10x or 100x returns, although this is more risky in the long run. “When options reach a certain price level, it is inevitable that these profits will either return to less volatile cryptocurrencies such as bitcoins or stack coins,” he added.
Dive into the history of the Bitcoin Season
Ross Middleton, CFO of the decentralized cryptocurrency exchange DeversiFi, believes that when bitcoin starts to rise, it “usually sucks oxygen” out of smaller coins, forcing most traders to go back to bitcoin.
Then, when Bitcoin starts to stabilize, traders start falling back to altcoins until the cash flow gets so big that they actually steal from the larger coins. “Bitcoin usually drops sharply when overleveraged traders get liquidated. Then the whole cycle starts over again as Bitcoin gradually rises again, ”said Middleton.
Wes Levitt, strategy manager at Theta Labs – the company behind blockchain-based video streaming network Theta – gave a somewhat unique perspective on the matter and told Cointelegraph that the Bitcoin season theory is correct and could be seen as a rudimentary form of sector trading. As is traditionally accepted in the stock market:
“This is an encouraging sign that we are seeing more complex cycles in various crypto sectors – for example, between DeFi [decentralized finance], layer 1 protocols, exchange tokens, etc.”
Katherine Deng, vice president of the MEXC Global Cryptocurrency exchange, told Cointelegraph that she has a similar view – money first flows into bitcoins on every rally, and then begins to move to other areas, including altcoins, incompatible tokens. For Fungi (NFT), GameFi, DeFi and even stack coins. “These flows are driven by innovation or, one might say, partial innovation in this beef market, such as liquidity extraction companies or AXS entering the market and gambling for profit,” she said.
Not everyone is convinced
While there have been significant periods of bitcoin dominance rising and altcoins losing, Nick Merten, CEO of crypto exchange Digifox and founder of cryptocurrency-focused YouTube channel DataDash, told Cointelegraph that he personally doesn’t notice such stories. He explained his position and explained:
“In the last cycle, as in this cycle, altcoins tended to bypass bitcoins. Given the large volumes of markets and the fact that there will always be new and exciting opportunities in the altcoin market, it is difficult to justify keeping mostly bitcoin during bull markets. I believe the bitcoin season will not continue.
He also stated that the market has yet to see a true alternate season, although throughout 2021, the dominance of altcoins has either increased or has supported overall support well. “I think altcoin dominance will continue to grow by about 75% in this cycle – between the maturity of DeFi and new Layer 1 protocols,” he said.
A similar opinion is shared by a representative of Binance, who wished to remain anonymous. They told Cointelegraph that there is not enough evidence to support the history of bitcoin season, adding:
“BTC accounts for over 40% of the market, so when it grows, it generates a lot of interest and some capital can circulate in it, and vice versa. on the market “. As more people buy bitcoin, the price will simply go up due to the limited supply. “