Nuance Comes to ‘Alts Season’

The past few weeks have brought their fair share of volatility, but altcoins have generally performed well over recent months. Whenever this happens, talk inevitably turns to the idea of another “alts season” - a term that has been used to describe broad, indiscriminate rallies across the altcoin market in the past. Many investors still look back to 2021 as the benchmark for such periods. Realistically, though, that kind of market environment isn’t a healthy goal.

Seeing the vast majority of tokens outperform Bitcoin by hundreds of percentage points over extended periods (we look at 180 days in the chart below), as in 2021, is more a sign of excess liquidity in the system than sustainable market health. Since 2021, altcoin rallies have become narrower and more selective - a sign, in our view, of a maturing market. Making money in 2021 required little more than participation; today, it increasingly requires discernment.

Encouragingly, there are still meaningful opportunities for those applying a more rigorous approach. Roughly 40% of the top 150 tokens by market cap have outperformed Bitcoin over the last 180 days, delivering average excess returns of around 45% - on top of Bitcoin’s ~50% gain. Notably, this analysis covers tokens that began the period in the top 150, a universe we screened for liquidity, suggesting that even without reaching into the smallest corners of the market, exposure to promising alts has been rewarded.

As the digital asset space continues to evolve, we expect rigorous token selection and diversified portfolio construction to play an increasingly central role in generating consistent returns.

The information herein is for general information purposes only, is not investment advice, and should not be used in the evaluation of any investment decision. An investment in digital assets involves a high degree of risk. Past performance is no guarantee of future results.