Investors Who Knew When to Trade Bitcoin (BTC) and altcoins could have significantly boosted their profits in 2020, according to new research from eToro, the popular social trading platform. The challenge, of course, is determining when the coveted alt season begins.
In its latest quarterly report, eToro breaks down several cryptocurrency investment themes related to the 2020 bull market. It also dedicates an entire section alt season – the part of the cryptocurrency market cycle where altcoins are rising against the dollar and potentially outperforming Bitcoin.
The survey found that the top 100 altcoins, if held the same, were “a more lucrative investment” than BTC for most of 2020 – until December 18, to be precise. However, investors who knew when to cycle from BTC to altcoins and vice versa had nearly doubled their profits for the year.
Such as eToro explains:
“If you started with bitcoin, with just two swaps throughout the year – bitcoin to altcoin in May and back to bitcoin in September – the profit will grow 3x or 4x through both investments to more than 7x.”
While eToro admits that forecasting the alt season and the BTC season is notoriously difficult, the research looks at various metrics that can help investors pinpoint market cycles.
Relative trading volume, social media activity, new coin listings, and the number of crypto project news articles published appear to be influencing whether altcoins are about to spend their time in the sun.
Trading volumes are of course a classic chicken or egg situation as it is not always clear whether trading activity is growing organically or simply because the price is rising.
In terms of social media activity, eToro uses data from The TIE, a crypto analytics company, to compare the volume of altcoin tweet to Bitcoin.
The data suggests that “the alt season may be determined by the relative number of tweets about altcoins,” the report says.
It goes on:
“This measure appears to include not only the May and October swap, but possibly also the short alt season in late February.”
Dogecoin (DOGE), the meme-based cryptocurrency, has recently caught the attention of social media. Last week, DOGE became the first altcoin to surpass Bitcoin in terms of daily trading volume, according to The TIE.
With regard to exchange listings, eToro used data from The TIE to demonstrate that there was a “marked increase in late summer 2020 listings”, which was during the same period that altcoins outperformed BTC.
Spikes in news stories published directly by cryptocurrency companies also seem to be related to the peak season. “This makes intuitive sense,” says eToro, as these articles usually cover project updates and other major announcements.