The Seasons of Crypto

By June 9, 2022August 10th, 20223 minute read

Seasonality is an attribute of a time series in which the data undergoes predictable and regular variations across the calendar year. Seasons refer to any predictable riff or pattern that recurs or repeats over one year. Numerous factors, data, and information are manifested in a single price and its movement. From professional analysts to amateurs, investors try to spot trends in asset values to forecast where they will go. 

What are seasons in Crypto? 

Similar to the traditional market investors, Crypto investors are looking for a ray of sunshine to outsmart the market. They are always interested in “timing the market” and uncovering patterns and trends to influence their entry and exit positions. Crypto investors have already declared numerous “seasons” despite the lack of historical data compared to traditional investments. “Altcoin season,” “crypto (or Bitcoin) winter,” and “DeFi Summer” are the most well-known.

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Defi Summer

In the summer of 2020, something odd happened in the crypto world. In a world where cryptocurrency prices dominate most conversations, a new phenomenon known as Decentralized Finance (DeFi) has begun to capture the interest of crypto fans at an unprecedented rate.

DeFi is a type of blockchain-based finance that employs smart contracts to provide financial instruments without the necessity for traditional intermediaries. 

In less than two months, the governance token for Yearn Finance, a DeFi Protocol, went from $6 to nearly $30,000. That represents a 500,000% increase in value. The phase was called the “DeFi Summer of 2020”.

AltCoin Season

Altcoin season is when non-bitcoin cryptocurrencies outperform bitcoin. Bitcoin, the cryptocurrency holding the largest market cap, is well-known and actively traded. Hence, there is a well-known index comparing BTC to non-BTC cryptocurrencies. This indicator, called “Bitcoin Dominance,” is defined as the ratio of Bitcoin’s market cap to the rest of the cryptocurrency market.

While Bitcoin used to have near-complete domination, altcoins’ presence and expanding popularity have caused Bitcoin’s supremacy to wane. When the market capitalization of several cryptocurrencies surpasses that of Bitcoin, it may herald the start of an altcoin season.

Altcoins typically outperform Bitcoin during an altcoin season, causing Bitcoin to lose market dominance. As a result, seasoned traders and investors with varied portfolios pay attention to altcoin seasons and make adjustments to their portfolios accordingly.

Crypto Winter

A lengthy period of declining prices is referred to as a crypto winter. For example, when the previous crypto winter began in early 2018, bitcoin had lost nearly 87 percent of its value in a year, compared to its all-time high in December 2017. Other cryptocurrencies were hit even harder than bitcoin, with the vast majority falling by 90-95 percent from their all-time highs.

Yes, the market has fallen again. Some experts believe that it is a phase of the crypto autumn; some experts say the winter is here, and some have very clearly stated that the winter, which might be at our doorsteps, is going to be a harsh one. 

Conclusion

Cryptocurrencies are a relatively new asset class that is fast expanding. New asset classes go through contraction and expansion cycles regardless of the calendar page.

We cannot exclude the possibility of a new altcoin season or a harsh crypto winter. However, anticipating any “crypto season” from historical calendar data is difficult right now. It will only be the market that will tell us.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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