Bitcoin often paves the way for the rest of the crypto market. When it takes a pause, altcoins get their turn to shine. BlockchainShock.com dives into the most important fundamentals behind every altcoin price explosion. It’s essential reading for investors looking to jump into this fast-evolving space. Whatever your experience level with cryptocurrency, Kwame Nkosi’s combination of analytical depth and on-the-ground expertise will demystify the diverse – and sometimes dangerous – world of altcoins.

A cooling-off period in Bitcoin’s price is the most typical precursor for altseason. With Bitcoin consolidating, investors will move their attention—and dollars—to altcoins looking for the next big percentage gain. This rotation is driven by a continued drop in Bitcoin’s market dominance. In late 2017, Bitcoin’s market share was through the roof with an unbelievable 86.3%. By early 2018, its supremacy dropped to a low of 38.69%, which paved the way for huge increases in altcoins. One of the most obvious signs that an alt season is beginning is a noticeable increase in altcoin dominance as a percentage of the overall cryptocurrency market. This change is further evidence that sentiment among investors has turned.

Even the prospect of Bitcoin reaching major milestones such as $200,000 will likely temporarily strengthen its dominance. History dictates that one day, those profits will be realized and pushed back into altcoins, igniting the next run. Today, new meme coins such as Dogecoin and Shiba Inu have taken the internet by storm. Their meteoric rise shows us the power altcoins can have in capturing tremendous waves of market enthusiasm and providing massive returns on investment.

Project-Driven Catalysts Behind Altcoin Surges

Here are a few project-specific factors that can set an altcoin’s price on fire. Exchange listings, tokenomics, and strategic partnerships are the major catalysts investors need to keep a close eye on.

Exchange Listings: A Gateway to Liquidity and Exposure

After all, getting listed on major exchanges is something of a game-changer for any cryptocurrency. It is a giant leap on the accessibility for the traders which means more liquidity. Increased liquidity results in more trading activity, which can create momentum and further push up the price. Finding inspiration in your own community. The psychological impact of a new competitive listing announcement should not be dismissed. It creates buzz and excitement around the project, boosting its visibility to an even larger audience.

Greater liquidity can contribute to greater price volatility, especially in the first few hours or days following a listing. Tokens may have huge price fluctuations right after listing. For example, SUI peaked at $1.84—almost an 18x gain—in the opening hour on Binance. These short-term swings can be great for savvy traders, but at the same time involve high levels of risk. Beyond the initial hype and volatility, exchange listings can impact a token’s fundamentals too, creating long-term value trends. Aptos pumped from $0.60 to $1.40 within two months of its debut listing. Today, in fact, it’s worth much more.

Tokenomics: Designing for Value Accrual

Tokenomics, or the expectations and incentives created by the economics of a cryptocurrency token, can be make-or-break for a crypto project. Thoughtfully built tokenomics that incentivizes holders, rewards active participation, and manages inflation rate can play a major role in driving demand and the token’s price. Here are a few examples:

  • Token Burns: Binance (BNB) utilizes a quarterly burn mechanism, where 20% of its profits are used to buy back and burn BNB until 50% of the total supply is destroyed. This deflationary mechanism reduces the supply, potentially increasing the value of the remaining tokens.
  • Airdrops: Uniswap (UNI) airdropped 15% of its genesis supply to the community, creating a sense of ownership and rewarding early users. Airdrops can increase awareness and engagement, leading to greater demand for the token.

Some projects use Liquidity Bootstrapping Pools (LBPs) to gradually adjust token weights over time, allowing for a more stable and fair token distribution. Other protocols use Simple Agreements for Future Tokens (SAFTs), which are contracts with investors. This robust data-driven approach clarifies token allocations upfront, providing transparency around token distribution over time. Stargate used an auction-based model to allocate tokens. Two whales largely swallowed the process, underscoring the imperative for better approaches.

Project Examples

Here are a few examples of altcoins and the catalysts behind their recent surges:

  • Humanity Protocol: Focuses on proving humanness using palm recognition, setting it apart in a world of bots and AI. Partnerships with identity verification services and potential integrations with social media platforms could drive further adoption.
  • FUNToken: Aims to be the leading iGaming token. New partnerships with online casinos and the development of innovative gaming applications would likely boost its value.
  • Plume: Focuses on streamlining real-world asset tokenization. Securing partnerships with real estate developers and financial institutions could significantly increase its adoption.
  • Zcash: A privacy-focused cryptocurrency. Technological advancements in privacy protocols and increased regulatory scrutiny on data privacy could drive demand for Zcash.
  • Sahara AI: Aims to decentralize AI model training and deployment. Successful implementation of its decentralized AI platform and partnerships with AI research institutions could drive its value.
  • Wrapped NXM: Represents insurance coverage for smart contracts. Increased adoption of DeFi insurance and partnerships with major DeFi protocols could boost its value.

Partnerships: Expanding Reach and Utility

Strategic partnerships can massively increase an altcoin’s exposure and use cases. Partnerships with big tech firms, other blockchain companies, or public sector organizations can add a level of credibility while opening doors to new markets. These types of partnerships can create more adoption, more awareness, and in turn more demand with the hope of raising the token price.

Actionable Insights for Investors

Here are some factors to consider:

  • Market capitalization: Look for altcoins with growing market capitalization, as seen in the case of Solana, which has become attractive for decentralized finance applications, NFT marketplaces, and gaming platforms.
  • Utility and use case: Look for altcoins with a clear utility and use case, such as XRP, which is designed to minimize friction in cross-border transactions.
  • Adoption and traction: Identify altcoins with growing adoption and traction, such as stablecoins like Tether, which is widely used in the cryptocurrency market.
  • Partnerships and collaborations: Consider altcoins with notable partnerships and collaborations, such as Solana, which has become a hub for new token creation.
  • Community and social media presence: Evaluate the strength of the altcoin's community and social media presence, as seen in the case of meme coins like Dogecoin and PEPE.

By identifying these catalysts, investors can increase their likelihood of finding the next altcoin poised for meteoric success. Extensive analysis is an essential step to this process. BlockchainShock.com is dedicated to offering the most innovative tools and insights to help you make sense of the rapidly changing cryptocurrency landscape.