Altcoin

Altcoins, short for alternative coins, refer to any digital currency other than Bitcoin. There are thousands of altcoins in existence, and they can serve various purposes such as being used as a payment method, providing access to certain services, or offering utility within decentralized applications and ecosystems. Ethereum, the second-largest cryptocurrency by market capitalization, is technically an altcoin, as are tokens built on its network, competing smart contract platforms like Solana and Avalanche, and the wide universe of decentralized finance and gaming tokens.

The altcoin market tends to behave differently from Bitcoin in important ways. During bull markets, altcoins frequently outperform Bitcoin as speculative capital flows into higher-risk, higher-potential assets — a phenomenon called "altcoin season" or "alt season." During bear markets and periods of uncertainty, the opposite often occurs, with capital rotating back into Bitcoin as a relative safe haven within the crypto space. Tracking Bitcoin dominance — Bitcoin's share of total crypto market capitalization — is one way traders monitor these rotations.

For algorithmic traders, altcoins present both opportunities and risks. Their often lower liquidity compared to Bitcoin means that price movements can be more dramatic, which can amplify both profits and losses. Thinner order books also mean that even moderately-sized bot orders can move the market, a phenomenon called market impact. However, less efficient pricing in smaller altcoin markets also creates more opportunities for technical analysis and arbitrage strategies to generate consistent returns, which is why many professional algo traders dedicate significant attention to researching and trading the altcoin market.