Is “Bitcoin Season” a real or an extremist theory?

With Bitcoin (Bitcoin) Maintaining above the vital psychological threshold of $60,000 for two consecutive weeks, more and more voices seem to echo the sentiment that the market may be in another “Bitcoin season”.

This basically refers to the time window for funds to flow from various altcoins back to the flagship cryptocurrency, until eventually interest starts to dry up and funds start to flow back to different altcoins again.

In order to assess whether such a concept really exists and deserves attention, Cointelegraph contacted Kadan Stadelmann, CTO of Komodo, an open source technology provider. In his opinion, the Bitcoin peak season phenomenon is very real and seems to have greatly promoted market psychology, adding:

“For new institutional funds entering the field, Bitcoin seems to be a’safe bet’ because it is the leader in market capitalization. It is considered to be less risky, but its chance of obtaining high returns is also less because it requires a large amount of Buying a lot of whales can affect the price.”

Stadelmann went on to point out that for retail investors, their overall prospects are quite different, because most of these people usually want to find altcoins that can bring 10x or 100x returns, even if in the long run, this Proposal is more risky. “It is inevitable that when the substitute reaches a certain price level, profits will flow back to less volatile cryptocurrencies such as Bitcoin or stablecoins,” he added.

In-depth understanding of the “Bitcoin Season” narrative

Rose Middleton, CFO of DeversiFi, a decentralized cryptocurrency trading platform, believes that whenever Bitcoin starts to rise, it usually “sucks oxygen” from smaller tokens, causing most traders to switch back to Bitcoin. .

Then, once Bitcoin starts to level off, traders will start turning to altcoins until the flow of funds becomes so large that they are actually bidding to steal from larger tokens. “As over-leveraged traders are liquidated, Bitcoin usually falls sharply. Then the whole cycle begins again, and Bitcoin gradually moves upward again,” Middleton said.

Wes Levitt, director of strategy at Theta Labs (the company behind the blockchain video streaming network Theta), provided a somewhat unique view on this matter. He told Cointelegraph that the Bitcoin seasonal theory is valid and can be regarded as an industry rotation. The original form can traditionally be seen in the stock market:

“This is an encouraging sign. We see that the cycles of different encryption industries are more refined-that is, between DeFi [decentralized finance], The first layer of agreement, exchange tokens, etc.-because this means that the capital entering the cryptocurrency is becoming more and more complex. “

Katherine Deng, vice president of the cryptocurrency exchange MEXC Global, told Cointelegraph that she holds a similar view-that is, funds first enter Bitcoin in each bull market cycle, and then begin to enter other areas, including altcoins and non-homogeneous tokens. Currency (NFT), GameFi, DeFi and even stable currency. “The driving force of these flows is innovation, or we can say micro-innovations in this bull market, such as the introduction of liquidity mining by COMP, or the entry of AXS into the game to earn the market,” she said.

Not everyone believes

Despite an important period when Bitcoin’s dominance has increased and altcoins have lost ground, Nick Merten, CEO of the crypto trading platform Digifox and creator of the crypto-centric YouTube channel Data sprint, Told Cointelegraph that he personally did not pay attention to these narratives. In expounding his position, he pointed out:

“In the last cycle and this cycle, the development speed of altcoins has generally surpassed that of Bitcoin. Considering the scale of the market and there will always be new and exciting opportunities in the altcoin market, it is difficult to prove that during the bull market, it is mainly to stay Bitcoin is reasonable. I don’t think the’Bitcoin season’ will last.”

He further believes that the market has not even truly witnessed the real altcoin season, although the dominance of altcoins throughout 2021 will either grow or maintain a good overall support level. “I believe that in this cycle, the dominance of altcoins will continue to grow to 75%-that is, between the maturity of DeFi and the emerging first layer agreement,” he said.

A Binance spokesperson holds a similar view, and he wants to remain anonymous. They told Cointelegraph that there was insufficient evidence to confirm the Bitcoin season narrative and added:

“BTC occupies more than 40% of the market. Therefore, when it rises, it will attract a lot of attention. Some capital may choose to enter in turn, and vice versa. As the global adoption of cryptocurrencies accelerates, more and more Money and people enter the market. When more people buy Bitcoin, the price will rise because of the limited supply.”

When will the ongoing Bitcoin cycle end?

In Deng’s view, it is best for anyone to guess when this ongoing Bitcoin bull market will end, adding that technical indicators seem to indicate that we may be in the middle of the ongoing cycle. She further stated that altcoins such as Shiba Inu (SHIB) are performing well in the current operation, which shows that even in a Bitcoin-dominated market, there will always be funds flowing into other products. Deng said:

“With the launch of the Bitcoin ETF [exchange-traded funds], The participation of many listed companies has increased, and the expansion of NFT art space has improved the liquidity of the entire market. We may have a finer movement between tokens, rather than a single cycle between BTC and alts moving forward. “

Levitt believes that just because altcoins such as Chainlink (LINK) and SHIB are currently performing well does not mean that the current Bitcoin cycle will end soon, adding that as long as institutional funding and adoption rates continue to increase, the continuing trend will continue. .

“Trying to identify the state of the crypto market by studying SHIB is a bit like trying to predict the S&P 500 index based on GME’s trading methods,” he joked.

Stadelmann also believes that it is difficult to gauge when the Bitcoin cycle ends and when a new alternative season begins, especially because whenever BTC starts to perform well, the entire market starts to rise with it. Having said that, he does admit that there are always certain outliers, many of which are usually driven by whale accumulation. In response, he said:

“It was announced on September 23 that the 50 trillion SHIB donated for India’s Crypto Covid Relief had all been sold to USDC [USD Coin]This reduces concerns about any market sell-offs of similar size. This was followed by a massive purchase of 6 trillion SHIB (now valued at more than US$270 million) on September 30. This means that every cryptocurrency will not follow the narratives of “Bitcoin Season” and “Altcoin Season”. “

The future is still unpredictable

It is undeniable that the crypto market has matured a lot in the past few years. The Binance spokesperson believes that in addition to the Bitcoin seasonal theory, this has also spawned a new narrative. For example, they believe that in addition to the inflow and outflow of Bitcoin into other altcoins, the DeFi market and NFT are also beginning to function as separate areas today.

Finally, they emphasized that since the number of altcoins is increasing every day, it is difficult to predict the market’s direction in the near and medium term.

“Similar to other investment categories, different crypto industries are now unique based on countless factors. It is difficult to comment on altcoins because there are so many altcoins and we cannot always predict where they will go.”