Alt season is in full swing – But how long will it last?

If you've been paying attention to Bitcoin lately, you may be impressed by all the recent activity. Not only is the number-one cryptocurrency in its third consecutive week of trading above $10K but it also briefly pierced the $12K barrier and is currently posting a 25% monthly gain and YTD of over 65%. Pretty impressive, right?

Yet, that's a mere drop in the bucket compared to what's going on in alts. Alt Season is officially in full swing with some major tokens posting monthly gains of over 100% and Chainlink's LINK up an astounding 1,000% YTD. So, how long will it last? Let's take a closer look.

Bitcoin's Breakout Isn't Deterring Alts

When Bitcoin suddenly and unexpectedly broke out of its slumber during the last week of July, most major alts (with the notable exception of Ethereum) briefly stumbled. It appeared as if traders uninspired by BTC's lack of movement may be taking the gains made in alts and channeling them back into Bitcoin. Many began to question if Alt Season was coming to an end... Not so fast.

The correction lasted barely 24 hours and, while Bitcoin has continued to soar higher against many people's expectations, alts are undeterred. The gains being posted by BTC are being dwarfed by that of smaller market cap coins that are capturing the imagination of traders and investors, particularly in the DeFi space. At the time of writing, Aave's token (LEND) has shot up by 60% in 30 days and Band Protocol (BAND) an astonishing 206% 1 . Let's not forget about Ethereum (ETH), with a YTD of 220% (66% this month).

The area of decentralized finance is certainly seeing the most action as savvy investors find alternative ways of making their money work from them through lending, borrowing, staking, and liquidity mining. From a humble start to 2020 to more than $6.2 billion of locked value in DeFi protocols at the time of writing, decentralized finance has been galloping along this year, even drawing the interest of major institutional players like TDAmeritrade and Arca Labs.

But, DeFi isn't the only place where gains are being made. The Algorand network that's developing the Marshall Islands' cryptocurrency, has seen its token shoot up by 41% in 30 days. And there are meaningful strides happening all across the crypto space from Ripple's XRP (47% in 30 days) to Litecoin's (LTC) 47%. As Bitcoin climbs, alts are climbing higher.

How Long Will It Last?

Of course, the second question people ask (followed only by "how high?"), is how long will this rally continue? The first rule of investing, after all, is to buy low and sell high. During Alt Seasons, many traders will succeed in doing this but the sweeping majority will find themselves chasing a rally and doing the reverse. Buying high and making losses in the inevitable corrections that follow.

When 2017's Alt Season was underway, everything was going up. Just one enormous speculative FOMO-fueled bubble that was waiting to burst in the spectacular style that it did, wiping out the gains of most inexperienced traders. But is that what's going to happen this time around?

It's certainly possible. We're dealing with highly volatile assets at a time of extreme global uncertainty. However, there are plenty of other factors that indicate the fallout (when and if it comes) will be less severe than the last time around.

For starters, the projects that are capturing interest in 2020 are fully functioning and providing real-word utility already. They aren't websites and whitepapers making promises they can't deliver on but actually being used, developed, and improved all the time. And while we're not exactly talking about traditional finance, regulation in the cryptocurrency space has also improved tenfold.

Scams and Ponzi schemes abounded during the last bull run with many naive investors being taken in and losing all their money. While we still hear of the occasional investor trap, the vast majority of these fly-by-night projects have now left the space. If a correction is coming soon in alts; it will likely be a temporary pause on the brakes rather than a steep acceleration. At the very least, investors won't be left holding valueless tokens after buying into vaporware projects.

Other Factors Influencing This Year's Alt Season

The explosion of DeFi and the giant improvements in quality aside, no one can ignore the glaring macro factors bearing down on all markets in the shape of a global pandemic, escalating international tensions, and economic downturn. Cryptocurrencies may be volatile assets, but there have been almost as many ups and downs in traditional investments like stocks and commodities this year.

Oil experienced a catastrophic slide and stock markets have lurched violently up and down shaking investors' faith. The S&P 500 may have hit yet another record high during a pandemic yesterday. But let's not forget the massive selloffs and sharp drops that investors have experienced this year--nor the excessive QE that is serving to inflate the bubble further while devaluing the dollar.

People are becoming savvier about money creation and the cracks are appearing in the traditional financial system. As the disconnect between Wall Street and Main Street grows ever larger, so does the increase in investors seeking alternative assets. And that means that this year's Alt Season may be longer than we previously thought.