As bitcoin roars back into a bull market, traders are eagerly awaiting “alt-season,” a parabolic jump in altcoins that historically follows bitcoin’s rise.
But they’re going to be disappointed. There won’t be an alt season in this hype cycle. Not like 2017, anyway.
Altcoins like XRP, EOS, XLM, BSV and many others in the top 20 will drastically underperform bitcoin in this bull run unless they make a major real-world breakthrough. And hundreds of altcoins will disappear completely. Here’s why:
- The narrative has switched to “bitcoin, not blockchain.” Incoming institutional money won’t buy alts.
- None of the 2017 alt season catalysts exist this time around.
- Traders will use the growing bitcoin derivatives market to find huge gains instead of alts.
Let’s take each one in turn.
1. This time it’s “Bitcoin, not blockchain”
The whole narrative around bitcoin is different this time around. In the last hype cycle, leading figures in the tech and banking industries always kept their distance from bitcoin. They all used the same “blockchain, not bitcoin” mantra.
That’s why tons of venture capital (VC) money flowed into blockchain projects and altcoins. At the same time, bitcoin was plagued by scaling debates. Investors were desperately looking for “faster” and “better” blockchains. That’s why Ripple, EOS, Tron, Stellar and others got so much hype.
This time is different.
The tone has shifted to “bitcoin, not blockchain.” As CCN.com reported, the way people talk about bitcoin outside the industry has changed for the better. Banks, institutions, and tech companies are now contributing to the bitcoin ecosystem. Huge names like Fidelity and Nasdaq are building bitcoin trading products.
All signs suggest the coming bull run will be rooted in institutional money. Expect them to “play safe” and stay in bitcoin as they test the waters.
As for retail crypto platforms, the biggest external players, like CashApp’s Jack Dorsey is hyper-focused on bitcoin, not altcoins.
2. The catalysts for “alt season” are gone
Last time round, the stage was perfectly set for a parabolic alt coin run-up. Ethereum emerged to help launch hundreds of blockchain projects. Initial Coin Offerings (ICOs) exploded and money poured into every “bitcoin-killer” on the market.
Now ICOs are dead. After getting burned in 2017, venture capital will be much more selective. And regulators will be watching much more closely. The quality of projects will improve.
Advertising will also play a roll. Facebook, Twitter, and Google – which all inadvertently hyped up altcoin scams in 2017 – have much stricter advertising conditions. Celebrities will face fines for shilling coins.
In other words, everything that powered the 2016-’17 alt-season is gone.
3. Bitcoin derivatives will give traders their thrills instead of alts
There’s another reason behind my prediction. In 2016-2017, traders looked at the altcoin market to find enormous gains.
This time around, traders have access to better and more secure leveraged trading. Volumes on BitMEX, which allows 100x trading on bitcoin are through the roof. Binance is about to launch a derivatives platform with 20x bitcoin trading.
Instead of chasing huge returns from the wild west altcoin market, traders will tap into the established liquidity of leveraged bitcoin trading.
This alt season will be brutal
Don’t get me wrong. Some altcoins will absolutely outperform bitcoin in this bull run. But it will be hyper-focused on quality projects. Early indications show that traders are putting money into high-utility projects like Binance Coin and Chainlink.
Having exhausted all their hype, large-cap alts like XRP, EOS, and XLM need to make a real-world breakthrough. If they don’t, they’ll lag bitcoin in this bull market.
As for 100x gains? New projects launched during the bull run may offer parabolic returns as they can tap into new hype and speculation.
But the real cull will come in the mid-low cap range. Most of the ICO class of 2017 will fade to zero. It’s going to be brutal.
Last modified: March 4, 2021 2:37 PM