Path to Altseason: Understanding the Liquidity Flow from Bitcoin to Altcoins

Altseason is one of the most exciting periods in the cryptocurrency market. It’s when altcoins—cryptocurrencies other than Bitcoin—surge in price, sometimes outperforming even the top players. But Altseason doesn’t just happen randomly. It follows a clear, structured path where money flows in waves, starting from Bitcoin and eventually moving toward smaller altcoins.

In this guide, we’ll walk you through the four critical phases of Altseason—Bitcoin, Ethereum, Large Caps, and finally the Altcoin boom. This breakdown, visualized in the image you provided, shows how liquidity flows and sets the stage for explosive altcoin rallies.

Introduction to Altseason

Altseason, short for "altcoin season," is when a majority of altcoins experience significant price gains, sometimes far surpassing Bitcoin. While it may feel like magic to newcomers, seasoned crypto investors know that Altseason follows a predictable flow of money.

This path begins with Bitcoin and trickles down through other asset classes until it reaches the riskier, low-cap coins. Understanding this liquidity migration is key to making strategic decisions and maximizing gains while minimizing risks.

Phase 1: Bitcoin – The Starting Point of Money Flow

In the beginning, money flows into Bitcoin, the most trusted and recognized cryptocurrency. This phase is usually marked by rising Bitcoin prices, increased institutional interest, and dominance over other digital assets.

Key Characteristics of Phase 1:

• Bitcoin’s price begins a strong uptrend.

• Altcoins stagnate or even drop in value.

• Bitcoin Dominance chart rises.

• Institutional money and smart money pile into BTC first.

Bitcoin is considered the "safe" crypto bet. During this stage, most market participants are cautious and prefer the stability and history that Bitcoin offers.

Phase 2: Ethereum – Catching Up to Bitcoin

Once Bitcoin begins to plateau or slow down, money starts flowing into Ethereum. Investors who feel they’ve "missed the boat" on Bitcoin begin looking at the next largest cryptocurrency.

Highlights of Phase 2:

• Ethereum starts outperforming Bitcoin.

• “The Flippening” becomes a hot topic—will Ethereum surpass Bitcoin?

• ETH/BTC trading pair shows Ethereum gaining strength.

Ethereum’s strong ecosystem of decentralized apps, smart contracts, and DeFi projects makes it the natural next choice.

Phase 3: Large-Cap Altcoins – The Ripple Effect

After Ethereum shows significant gains, attention shifts to large-cap altcoins like Cardano (ADA), Solana (SOL), Polkadot (DOT), and others. These coins are still relatively safer compared to microcaps, but offer greater potential returns than ETH or BTC at this stage.

What Happens in Phase 3:

• Ethereum begins to stabilize or slow down.

• Large-cap altcoins break out and gain momentum.

• Media and influencers hype up coins like XRP, LINK, and LTC.

Retail traders begin entering the market more heavily during this phase, seeing opportunities in these relatively “affordable” high-potential coins.

Phase 4: Altseason – The Altcoin Explosion

This is the most exciting and volatile phase. Money pours into low-cap altcoins, often resulting in massive gains—100x coins become the dream of many. This is when Altseason is in full swing.

Key Traits of Altseason:

• High-risk coins pump rapidly.

• Even meme coins like DOGE and SHIB see major gains.

• New investors flood into the market, driven by FOMO (fear of missing out).

• It becomes difficult to tell which coins are truly valuable.

The market is euphoric, but risk is at its peak. Those who entered during Bitcoin’s early phase may start taking profits here.

How to Identify Each Phase

Recognizing which phase the market is in can help you position your portfolio correctly. Watch for:

• Bitcoin Dominance rising or falling.

• Ethereum outperforming BTC.

• News cycles and social media sentiment.

• Market volume and altcoin movements.

Smart Strategies for Each Phase

Don’t chase green candles. Always DYOR (Do Your Own Research) and use proper stop-loss strategies.

Risks of Chasing Altseason

Altseason brings big rewards, but it’s not without danger:

• Extreme volatility

• Rug pulls and scams

• Emotional trading errors

• Sudden crashes

Be cautious. Avoid going all-in during the final phase.

FAQs About Altseason

1. When does Altseason usually happen?Altseason often follows a strong Bitcoin rally and precedes a broader market correction.

2. How long does Altseason last?It can range from a few weeks to several months, depending on market conditions.

3. Can Altseason occur during a bear market?Yes, mini altseasons can occur even in bear cycles, especially in sectors like gaming or DeFi.

4. What indicators signal Altseason is starting?ETH/BTC strength, falling Bitcoin dominance, and rising large-cap altcoins are early signs

This chart perfectly breaks down the 4 phases of Altseason! It all starts with money flowing into Bitcoin, then shifts to Ethereum, moves on to large-cap altcoins, and finally explodes into a full-blown Altseason with small-cap coins pumping. Understanding this flow is key to timing your entries and exits. Don’t chase the hype—ride the wave smartly!

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👨‍🏫 About the Writer

Kevin — A teacher by profession, a father by choice, and a passionate advocate for unlocking the vast potential of cryptocurrencies and DeFi. My mission is to educate and empower others on the path to financial freedom, helping anyone curious about this dynamic and evolving space.

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⚠️ Disclaimer:The content provided is for informational and entertainment purposes only and does not constitute financial, legal, or tax advice. Opinions are solely those of the author, who is not a licensed financial advisor. Trading cryptocurrencies involves risk and may result in capital loss. Always do your own research.© 2024 DADS DEFI SPACE