ABSTRACT

We all know the saying behind 'alt-coins follow Bitcoin', and summarized briefly, it's due to the cumulative cash-flow that is carried by market momentum. A simplified version of this could be represented by the cash flow from Bitcoin -> Ethereum -> Altcoins.

It is undoubtedly true that Bitcoin is in a second-peak cycle, recently just hitting a new all-time high. However, historically with such moves, will a cumulative, follow-up alt-season occur soon after. Timelines are uncertain due to each cryptocurrency's relative size and distribution, but a major alt-season is prophesied to occur anywhere from a few weeks to months. Combined with the reasoning of this prediction, this post will attempt to further explain the macroeconomics behind alt-seasons.

It's recommended to read a case-study summary of the most recent May alt-season to get caught up: https://www.reddit.com/r/CryptoCurrency/comments/o20ofs/the_economics_behind_altseasons_a_case_study_of/

WHAT NEEDS TO HAPPEN FOR AN ALT-SEASON

Bitcoin needs a strong, upwards rally that accumulates momentum, enough to sustain a divergence of total crypto market cap v. Bitcoin. In layman's terms, this means a strong Bitcoin that holds its price very well, long enough for alt-season to begin anywhere from a few weeks to months later, dependant on each cryptocurrency's relative size.

Case Study #1

As demonstrated in Figure 1, where Bitcoin's price trend diverges from the rest of the crypto market cap, which will now be referred to as 'Market', causes a power vacuum of cash flow that causes an alt-season. The effects of this initial alt-season are demonstrated in Figure 2 with Ethereum's valuation, and Figure 3 with Cardano's valuation. Needless to say, the effects of divergence and subsequent power-vacuum, and alt-season are quite obvious once modelled under the right circumstances.

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Figure 1, a graph demonstrating the trend divergence between Bitcoin (in orange) and total crypto market cap (in green/ red)

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Figure 2, a graph demonstrating Ethereum's reaction to a Bitcoin v. Market divergence. Note that this is a percentage-based graph, but during this time, Ethereum put a 520% appreciation within 189 days of the divergence. The blue verticle line indicates the start of major divergence.

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Figure 3, a graph demonstrating Cardano's (ADA) reaction to a Bitcoin v. Market divergence. Note the delayed parabolic move, and how Cardano did not immediately go nuts. This is due to the simplified cash flow model of BTC -> ETH -> Alt-coins, denoting that alts like Cardano would get their cash influx much later than bigger coins.

Case Study #2

Another, more recent example of alt-seasons can be retrieved from the May alt-coin season. As demonstrated in Figure 4, a massive divergence was created from Bitcoin's residual market momentum. Figure 5 portrays Ethereum's reaction to the divergence.

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Figure 4, an in-depth comparison of the Market (in green/red) v. Bitcoin (in orange). Note the even stronger divergence caused by the cumulative momentum carried by the initial Bitcoin rally to 64k USD.

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Figure 5, a depiction of Ethereum's pump as a result of the alt-coin season caused by the Market v. Bitcoin divergence. Please note this chart is on a percentage-based scale, but within the timeframe of the most recent divergence, caused a massive 200% appreciation by Ethereum.

CURRENT CIRCUMSTANCES OF A DIVERGENCE, AND PREDICTIONS

Due to Bitcoin's second leg of the bull-run to a new all-time high, there seems to be another divergence forming, as demonstrated in Figure 6 and insinuated by Bitcoin's current price trend. As a result, as you could've already guessed, Ethereum is already tagging along, just recently hitting a close high of 4.4k USD, as demonstrated in Figure 7. Of course, other altcoins like Cardano, who lie closer to the bottom of the simplified cash-flow sequence of BTC -> ETH -> Alt-coins, are lying dormant, if not, even going down, as demonstrated in Figure 8! But don't worry, with time, even your pet project of an alt-coin will rise up.

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Figure 6, a new divergence forming is portrayed between the Market (in green/ red) and Bitcoin (in orange), represented in a percentage scaled graph.

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Figure 7, Ethereum's price shown in blue attempting to catch up with Bitcoin, in the process, hitting a close all-time high of 4.4k USD.

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Figure 8, Cardano's price on a percentage scale graph, shown to be almost 'dying' as it patiently waits for the alt-season to trickle down the sequence.

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TO CONCLUDE

Another alt-season is almost set in stone to happen, and depending on your cryptocurrency's relative size, is to happen from within a few weeks to months, excluding Ethereum of course, which I personally do not consider as an alt-coin.

I hope this due diligence helped clear up all the recent spewed-out copypasta of how cash-flow works in the cryptocurrency space. Understanding such variables and events can be both extremely entertaining and profitable, and as a result, are one of the essential skill-sets of any investor out there. All content displayed was created and developed by me, using third-party software.

Any questions, advice or corrections would be spectacular. Cheers!

Cringy Disclaimer Required By Law: I am not a licensed financial advisor nor does this content attempt to replicate any of the sorts. This content is listed strictly for entertainment and educational purposes. When in doubt, contact a professional. Your money, your problem.