The alt season is not arriving soon until Ethereum reaches its all time high – that is the harsh reality we must all accept. The market forces that created alt seasons as a predictable and lucrative phenomenon have altered beyond recognition and it is essential to recognize these altered market forces for any crypto investor to succeed.
The market has literally turned around from what was familiar to us. Ethereum's dominance of the smart contract space has declined from 90% all the way to about 50% today. This is not a number but a complete reorganization of how value flows through the crypto system on market movements.
This has a direct impact on the probability of an alt season. In previous cycles of the market the path to alt season was linear. Bitcoin would lead the way, Ethereum would trail and because Ethereum had hosted all but nearly all of the projects, the rising tide would lift all of the boats in the harbor. The presence of the projects being centered on Ethereum meant that when Bitcoin would lift off the positive effect would ripple throughout the market in a more centralized and powerful fashion.
Today's story is different. When Bitcoin moves big, the market energy doesn't land in one dominant smart contract platform. Instead it gets distributed across more and more Layer 1 blockchains and their respective Layer 2 solutions. Imagining pouring the same amount of water into double the number of buckets – each gets less and the effect gets diluted.
This effect of dilution is especially bad for an alt season. The fragmentation of the market such that even large Bitcoin movements may not create sufficient concentrated momentum to catalyze the type of altcoin growth that has occurred in the past is a concern. Diversification of the ecosystem is healthy for innovation and competition but has made it more challenging for price appreciation.
The slowing down of Ethereum's price movement from this dilution has far reaching implications. With Ethereum continuing to control around 50% of the market, its inability to capture an equivalent percentage of capital flow recently affects many projects and tokens that have been developed on top of it. This is a domino that continually makes it harder for the broader altcoin market to find harmony.
For those who desire to profit off an alt season this new reality requires strategic adaptation. The days of diversifying portfolios into numerous alts and waiting for the market to rise are probably behind us. Requiring success in this new reality is either better vision into specific projects or a risk-averse approach to established assets.
Bitcoin’s DCA (Dollar Cost Averaging) is looking like the safer bet for most. Unless you are high up the information chain and can spot projects early, trying to pick winners in this diluted market is getting harder. The risk reward for altcoin speculation has changed and Bitcoin looks relatively safer.
But there is one other spark that could trigger an alt season: a retail driven ETH price surge. If enough people push ETH to all time highs we could potentially see at least half of the market pop. This is the most straightforward path to an alt season with the current market structure.
Future investors must revise their expectations and approaches. The market does not say alt seasons are not possible but it does imply they may appear differently than they did in past cycles. The era of universal, concurrent altcoin rallies may be replaced with more targeted, rotation based growth.
For the rest of the investors that are still interested in getting into altcoin plays the trick is understanding this new market dynamic. The winners will most likely be a function of having better information or being able to hold out for ETH to make new highs. In the short term the conservative approach might be to accumulate Bitcoin and take any altcoin positions based on thorough research and high conviction.
The crypto landscape is adapting and altering, and therefore investors need to adapt too. Although the traditional alt season is perhaps harder to achieve in this diluted market, an understanding of these new dynamics can help investors position themselves for whatever the market holds in store.
The image used is AI generated.