Riding the Wave of Altcoin Season: What Crypto Trading Experts Say

Is this the altcoin season we’ve all been waiting for?

With institutional investors pocketing profits and funding rates hitting the roof, it’s a wild ride. Let’s dive into what’s happening in the world of crypto trading markets, especially when it comes to altcoins.

The Reality of Altseason

We’ve seen some altcoins surge—Hedera up 99%, IOTA up 79%, and JasmyCoin up 72%. But is it too good to be true? Felix Hartmann from Hartmann Capital is skeptical, noting that “teams and venture capital investors are beginning to cut back more aggressively.”

He tweeted, “Considering alt season tapped out for now. Most alts now have funding rates north of 100% annualized. Last moves purely perp driven, spot volumes declining. Leg down will be ugly. Doing some light 2x long BTC, 1x short tapped out dino coins. Traders may stay irrational.”

That’s a pretty stark warning. The funding rates have surged above 100%, indicating this market is heavily driven by margin traders while spot volumes dwindle. Remember the 2021 crash? Solana dropped by 64%, and XRP by 51%. We could be in for a similar ride.

The Balancing Act of Bitcoin Dominance

Bitcoin’s dominance is the real bellwether. Currently at 55% and falling, it raises hopes that altcoins could take center stage. But high funding rates, between 4% and 6% per month for perpetual contracts, could quickly become a burden if prices stagnate.

Some crypto trading experts, like Sensei, believe this decline is the beginning of something big. He told his 72,900 followers, “The altseason is just beginning.”

But institutional investors are playing it safe, locking in their gains. The divide between optimism and caution is a reflection of crypto market volatility.

Profit-Taking and Market Dynamics

Institutional investors have mostly zeroed in on Bitcoin, but their actions impact the entire crypto exchange market, including altcoins. When they pile into Bitcoin, it creates a bullish wave that can lift altcoins. But once they start taking profits, expect volatility.

If they offload Bitcoin, that could trigger a broader market sell-off, and altcoins will likely feel the brunt of it. Why? Because retail holders in altcoin markets are often more reactive to institutional selling.

The Bitcoin Dominance Dilemma

As for Bitcoin’s dominance, it can give an indication of market health, but it’s not the only factor that determines when altcoins will take off.

Market breadth, or the number of digital assets outperforming Bitcoin, is crucial. There’s an altcoin season index too, to measure how altcoins stack up against Bitcoin over time.

And let’s not forget trading volumes and liquidity—indicators of growing interest in altcoins.

A declining Bitcoin dominance could hint at a shift toward altcoins, but it’s not the whole story.

High Funding Rates and Altcoin Sustainability

High funding rates can be a double-edged sword for altcoin seasons. They can indicate bullish sentiment, but they can also drain profitability from long positions.

The risk of liquidations is higher too. If funding rates are high, they can shrink a trader’s margin balance, leading to potential liquidations. This can create a domino effect that stifles the rally.

Timing trades around funding intervals is key, but it adds complexity.

High funding rates can also create inefficiencies between futures and spot prices, causing price corrections and slowing down the momentum of an altcoin season.

Navigating the Market: Strategies for Crypto Traders

So what’s a professional crypto trader to do? Diversify your portfolio, avoid over-leveraging, and ensure you trust the projects you’re investing in.

Centralized exchanges aren’t always reliable, especially during market turmoil. Understanding liquidity risks is also essential.

Stay updated on regulatory changes and market sentiment. And be mindful of the psychological aspects of trading.

The altcoin season might be here, but it’s going to be a bumpy ride.