Bitcoin’s dominance cycle is remarkably consistent. Every bull market follows the same pattern: Bitcoin breaks out first, dominance rises to 60–70% as money flows from fiat, then dominance peaks and cascades into altcoins as investors seek higher beta.
The mechanics are simple. Bitcoin is the gateway asset—most new capital enters through BTC or ETH. Once Bitcoin stabilizes or consolidates after a 3–5x move, traders rotate into altcoins offering 10–100x potential versus Bitcoin’s likely 3–10x total cycle return.
Network effects and narrative drive altcoin outperformance. Solana’s 2021–2022 rise from $1 to $260 was fueled by “Ethereum killer” narrative plus actual cheap/fast transactions. Layer-2 tokens, AI coins, and meme coins follow similar patterns each cycle.
Smaller market caps create asymmetric upside. A $500M market cap coin moving to $10B is 20x; Bitcoin moving from $1T to $2T is only 2x. Liquidity improves dramatically as size increases, creating self-reinforcing loops.
Venture capital flows amplify the effect. VC firms that missed Bitcoin deploy into altcoins at lower valuations, then pump their bags through listings and partnerships once retail arrives.
The risk is equally asymmetric. Most altcoins go to zero eventually. The strategy is not “buy and hold altcoins forever” but rotate through narrative leaders each season: DeFi summer 2020, NFT summer 2021, layer-1 autumn 2021, AI winter 2023–2024, etc.
Bitcoin remains the best store of value and portfolio anchor. Altcoins are speculative beta plays that capture animal spirits during euphoria phases. A sophisticated portfolio holds 50–80% BTC/ETH as core position and rotates 20–50% into trending altcoins using dominance charts and relative strength indicators.
The cycle clock is predictable: when Bitcoin dominance drops below 50% and stablecoin supplies on exchanges surge, altseason is imminent. Missing it means capturing only Bitcoin’s modest multiple while watching smaller coins deliver generational wealth.