Is It Time to Forget Bitcoin and Buy Altcoins Instead?

Although 2024 has been a strong year for crypto as whole, Bitcoin (CRYPTO: BTC) has dominated the spotlight, leaving many altcoins in the dust. Bitcoin's impressive performance has overshadowed the rest of the crypto market, and many are likely wondering when will it be time to forget Bitcoin and turn to altcoins (essentially, all cryptos other than Bitcoin).

The answer is complex, but if history is any guide, the tides may be shifting soon.

Bitcoin's 2024 dominance

Altcoins -- those smaller, more speculative cryptos that sometimes skyrocket in a short time -- have had a relatively quiet 2024. Despite multiple forecasts of an altcoin resurgence, the rally hasn't arrived yet. This is primarily due to Bitcoin's dominance -- its share of the crypto market's value -- rising during the past two years and continuing to climb.

Today, Bitcoin's market cap makes up nearly 60% of the total crypto market cap and has been rising steadily since 2023. While Bitcoin's resurgence is responsible for renewed momentum across crypto, it has done little to benefit altcoins.

This rise in dominance is a telling sign of the market's current state. Historically, when Bitcoin dominance is on the rise, altcoins struggle to gain momentum. As long as Bitcoin remains the central focus, the likelihood of altcoins delivering significant returns remains low.

Data source: TradingView.

Data by TradingView

The key to an altcoin rally: Falling Bitcoin dominance and interest-rate cuts

What needs to happen for altcoins to shine? First, we need to see Bitcoin's dominance fall, a phenomenon that tends to precede an altcoin rally. The big question is: When will Bitcoin's dominance start to slip?

To get an idea, we can look back at previous market cycles. One of the most compelling scenarios is what happened in 2019. That year shares key similarities with 2024, particularly when it comes to interest-rate policy.

In both cases, the Federal Reserve initiated a rate-cutting cycle after a prolonged period of raising rates. While this may seem unrelated, there's a strong correlation between rate cuts and increased liquidity, which often leads to more risk-taking behavior by investors -- and risk-taking is exactly what drives the growth of altcoins.

When the Fed started cutting rates in 2019, Bitcoin dominance initially continued to climb, peaking at about 70%. But by the end of 2019, the trend began to shift. Altcoins started gaining momentum as liquidity flowed more freely into riskier assets. In just one year, the total altcoin market cap surged from $60 billion in December 2019 to an astonishing $726 billion by the end of 2020. Two years later, it ballooned to more than $1 trillion.

Image source: TradingView.

Data by TradingView

Are we on the verge of another altcoin boom?

Could we be on the cusp of another altcoin resurgence? It's certainly possible.

The Fed's most recent rate cuts in September 2024 could set the stage for a similar market environment. Just like in 2019, it may take several months for Bitcoin dominance to start slipping, but the groundwork for an altcoin rally appears to be forming.

If we follow the 2019 roadmap, altcoins could start to gain momentum toward the end of the year, and if liquidity continues to increase as rate cuts take effect, we may finally see altcoins catching up to Bitcoin in 2025.

That said, it's important to manage expectations. Bitcoin could very well continue to outperform altcoins for a while longer. However, it's likely safe to say that there are clear signs that the conditions for an altcoin rally are beginning to take shape.

By no means is this an incentive to try and time the market. Rather, it's a reminder to remain patient and consider the data points available.

In short, it's worth keeping a close eye on the altcoin market. If history is any guide, we could be on the verge of another explosive altcoin cycle. While Bitcoin continues to shine, don't sleep on the potential for altcoins to deliver extraordinary returns in the near future. See you in 2025.

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RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.