Has a bubble burst on altcoins?

After Donald Trump’s victory in the US presidential elections on November 5, a kind of bubble began to inflate on altcoins. 

Today, many altcoins are experiencing significant losses in the crypto markets, after weeks of gains. 

What is happening? 

The mini-altseason: has the bubble on altcoin already burst?

In reality, it would not be correct to say that the altcoin bubble has burst, however, several mini-bubbles have indeed burst. 

Everything begins with the correction of Bitcoin that occurred between the 23rd and 26th of November. 

Trump’s victory was declared on November 6, and at that point, the price of Bitcoin started a bullrun that in just over two weeks took it for the first time above $99,000. 

On November 22, however, the price of Bitcoin did not manage to break through the psychological threshold of $100,000, and the next day it began a correction that lasted almost four days, bringing it back below $92,000. 

During that correction, however, FOMO was still present in the crypto markets, and so it simply shifted to altcoins.

In fact, the Altcoin Season Index of CoinMarketCap has started to rise, climbing back above the 50 mark on November 25 for the first time in a very long time.

This index ranges from zero to 100. Below 25 points reveals a Bitcoin season, while above 75 points an altcoin season (more simply called altseason). 

After passing the 50 points on November 25, in less than a week it also surged above 75 points, revealing that there was an altseason underway. 

However, then in just three days it reached the peak of this period, and on December 5th, while Bitcoin for the first time in its history rose above $100,000, the altcoin season index began to decline.

Therefore, it was not a true altseason, but a miniature altseason, or mini-altseason. 

The mini-bolle

December 5 marked the end of the growth period for altcoins, which basically lasted about two weeks.

On Sunday, the altcoin season index of CMC was still above 80, but yesterday it plummeted to just above 60. 

What happened? 

The point is that during the mini-altseason mentioned above, many mini-speculative bubbles inflated on various altcoins, although not on all of them. 

These were not true and proper large speculative bubbles, but rather short mini-bubbles and above all of relatively contained size, for being bubbles. 

In particular, however, it was the speed with which they formed that raised some suspicions. 

On one hand, many of the late November altcoin rallies were clearly parabolic, on the other hand, a Bitcoin awakening was expected for December 5. 

And so simply with the awakening of BTC all the mini-bubbles that had formed, or that were forming, slowed down growth, or even stopped. 

The burst of mini-bubbles

The fact is that bubbles in financial markets always burst, sooner or later. You never know exactly when they will burst, and especially from which price levels they will start to fall, but you know that if they inflate, they will then deflate. 

Observing the rapid parabolic rises in the prices of many altcoins, it was clear that these were mini-bubbles, and although no one could know when they would burst, the awakening of Bitcoin expected on December 5 should have sounded like an alarm bell. 

The burst, however, started yesterday, Monday, December 9, and today it is simply continuing. 

Despite the picture being quite clear at this point, it is necessary to add some very important details to fully understand these dynamics. 

Short vs. long period

The mini-bolle are temporary phenomena that often form in the financial markets. 

In other words, they are relatively common dynamics, even if not very common, which therefore should not generate any surprise. 

In particular, mini-bubbles have such a short duration that they are almost never able to interfere with the medium/long-term trend of prices. They have a clear and significant impact only in the short term, and often once they burst, they leave things more or less as they were before they started to deflate. 

For those who engage in trading, they are actually an excellent opportunity, in theory, to try to buy at a low price and sell at a higher price in the shortest possible time. 

Instead, for those who are holding, they are just a nuisance, if things go well, and if things go badly, they can be opportunities to lose money if assets are purchased at prices that are too high. 

What to expect from the mini-bubble on altcoins?

Furthermore, there is another very important detail to take into consideration. 

When a mini-bubble bursts, everything returns to how it was before, and therefore nothing prevents other bubbles from inflating in the future. 

Indeed, if the Bitcoin bullrun should eventually resume, a dynamic similar to what happened in recent weeks could absolutely repeat itself, even multiple times. 

The discussion changes only if the bubbles are macro, meaning of much longer duration and extension. 

In light of this, it is obvious that mini-bubbles can be great opportunities for traders, but for holders, they tend not to be positive at all. After all, primarily Bitcoin is the cryptocurrency that seems most suitable for holding, while as far as altcoins are concerned, it is often better to use them only for trading, both in the short and medium term.