2024 might be the year of altcoins, but this event can be triggered by a significant value increase of Bitcoin and Ethereum, the most popular cryptocurrencies on the market. As Ethereum continues developing through checking another step on the roadmap and Bitcoin leverages approved spot ETFs, both assets grow and contribute to favorable macro conditions that will change the crypto ecosystem. Binance data shows that trading is intuitive if you want to learn how to buy Bitcoin, while Ethereum provides a vast tool environment for developers.
But their success might grant altcoins the chance for another season, meaning that alternative coins will become increasingly profitable as they’ll outperform Bitcoin and Ethereum in value. Famous altcoins include Cardano, Dogecoin, and Litecoin, created as a substitute for BTC and ETH as they’re cheaper.
Still, they might become significant assets in 2024, so investors must prepare their portfolios for diversification.
Why are altcoins easily influenced?
Since Bitcoin was the first cryptocurrency, it holds power over the market due to its volatility resistance. Hence, altcoin prices are somewhat measured in Bitcoin because most altcoins can’t be bought through fiat currencies, meaning investors must first get Bitcoin and then trade for it Dogecoin, for example. This is why altcoins are tied to Bitcoin, so when their value is down, it’s most likely that Bitcoin is in a bearish period.
However, not all altcoins will follow Bitcoin during price shifts. For instance, experts believe that not all altcoins will be part of the altcoin season 2024, especially those without exciting features or upcoming projects. More than 25,000 cryptocurrencies are out there, but they’re not all active on the market.
How does the altcoin season happen?
The altcoin season isn’t easy to spot before its occurrence, but investors should expect it after a consistent growth period from BTC or ETH. Users seek additional projects to diversify their portfolios when this happens since BTC and ETH might stagnate after a reasonable period. Eventually, this leads to increased liquidity and interest in the market.
Of course, professional investors use the “Altcoin Season Index”, which uses specific mathematical systems to determine the most popular and capitalized altcoins that showed better development than Bitcoin and Ethereum over a specific period. For instance, if the index indicates a 50% value, this means that half of the best altcoins are performing better than Bitcoin.
Hence, when choosing an altcoin, users must pay attention to their capitalization ranking and invest only in the highest ones. At the same time, they must pay attention to the positive results of returns over a few years.
Causes of the altcoin season appearance
It’s not sure yet why altcoin seasons happen, especially since altcoins are relatively new to the market. However, a few aspects contribute to its occurrence, such as investors moving their funds from Bitcoin to other assets. For example, after a bullish trend, when Bitcoin prices stabilize, investors are searching for other lucrative investments, such as altcoins that have interesting projects, and sell their BTC for said altcoins, which can put the base of a new season.
At the same time, the alt season can start when NFT or DeFi-based altcoins become more popular on the market. When DeFi exploded on the market in 2020 and NFTs in 2021, altcoins like Ethereum were streaking. Now, we should expect Web 3.0 and AI-based tokens to take the lead for 2024 and beyond, so investors should look into these coins.
Investors should focus on building their portfolios
Predicting market movement, especially in crypto, can be difficult, considering volatility features and the need to check various details constantly. Hence, investors shouldn’t base their profitability on predictions but rather prepare their portfolios for any situation.
The main goals should include maximizing profits and minimizing risks through approaching different assets with distinct use cases, structures, and roadmaps. Usually, the most searched crypto projects provide the best return opportunities, but this is only a short-term certainty since this kind of tops change rapidly. This means that investors must also learn to re-balance their portfolios when some assets are not performing anymore and replace them with more profitable ones.
Investors should approach different strategies to avoid making this a liability depending on the risk tolerance. Hence, some must invest in low-volatility crypto, such as Bitcoin and Ethereum, rather than altcoins, while others can easily include diverse assets in their portfolio.
Best strategies to diversify one’s portfolio
Luckily, there are a few tried-and-tested strategies for beginners and even advanced investors that can help minimize risks. For instance, blending famous cryptocurrencies with new presale projects balances the portfolio that produces different returns and ensures a stable risk-return ratio. Hence, choosing small and large cryptos simultaneously is the easiest way to diversification. In some cases, if the projects seem promising, investors can even get them during the presale phase, even though this increases risk levels.
Another efficient method is to diversify in terms of market area for the same purpose as the previous strategy ―to benefit from different returns. Some popular crypto areas include DeFi, NFT, the Metaverse, and AI cryptocurrencies, which, depending on trends, can be more profitable than regular coins.
Of course, taking an interest in blockchains is also productive because these ecosystems are correlated with certain cryptocurrencies, so they can provide diverse income resources. For instance, the Ethereum blockchain is highly developed, and the majority of crypto projects are built on it. Still, many other potential competitors, like Solana, Cardano, and Ripple, deliver creative and affordable projects.
Bottom line
2024 might be the year of an upcoming alt season when assets like Solana and Cardano outperform Bitcoin and Ethereum. Since there’s an increasing demand for the two famous cryptocurrencies due to the emergence and approval of spot BTC ETFs, the period following might trigger altcoins to increase in value since investors are looking for more profitable crypto options. Hence, they must prepare to sustain the market changes with a solid and diversified portfolio.