3 Devastating Mistakes to Avoid During Crypto Altcoin Season

There is a moment in every market cycle when the chart goes sharply up and to the right, and even the calmest investors hear a tiny internal voice shouting to buy more. Altcoin season, also known as alt season, is the prodigal period when capital aggressively rotates from Bitcoin (CRYPTO: BTC) into a wide set of non-Bitcoin cryptos, causing them to outperform wildly and compressing years of emotion into weeks. It rewards discipline and punishes euphoria. But during the period, euphoria tends to be everywhere, and discipline looks like a stubborn rejection of taking on any risk.

That's exactly why avoiding a few classic errors during alt season matters more now than at any other time, as the odds are fair that an alt season could be right around the corner. Here are three of the most common and most deadly mistakes you should avoid if it happens.

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Mistake No. 1: Over-investing

Alt season is a period when altcoins like Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and Cardano, among many others, rally absurdly faster than Bitcoin as capital rotates across the market. Many different coins multiplying in value in just a few days or weeks is the norm. Smaller cryptoassets are even more volatile than they usually are.

The enemy of investors in these windows is, unfortunately, their own enthusiasm. Social media is usually awash in exuberance, with opportunities seemingly teeming everywhere at once. Fear of missing out (FOMO) begets overtrading and speculative positioning at a time when prices are unsustainably overextended to ridiculous heights. But the music always stops, and most alt seasons only last a few months, after which prices tend to crash by 80% or sometimes even more.

The antidote is to determine a preset investing schedule and position sizing. Dollar-cost averaging (DCA) reduces the role of emotion and keeps you aligned with a plan.

In practice, that means writing down your max allocation to altcoins, then splitting up your entries over weeks. If prices rip higher, you will still participate without blowing past your risk limits. If they whipsaw, your regularly timed buys smooth the ride. The idea is to make enthusiasm harmless by preventing it from provoking impulsive actions.

Mistake No. 2: Rotating out of quality to chase the hottest new thing

This is the canonical alt season blunder, so pay extra attention. Due to constantly being barraged with news of coins they don't own rocketing higher, investors often take their gains from high-conviction assets like Bitcoin, then sell them to shift capital into lower-quality assets to supposedly amplify their returns even further.

Sometimes it works for a moment. More often, it concentrates risk just as liquidity thins, and it often results in blowing years of a portfolio's compounding.

Your core positions belong in assets with durable use cases and network effects. Bitcoin, Solana, and Ethereum fit that bill. Other assets that are likely to run during an alt season, like Dogecoin, will tempt you. Don't give in.

Mistake No. 3: Trying to time the top and sell everything at once

When prices are skyrocketing, many investors have at least a dim idea that they need to get off the roller coaster at some point. Some delude themselves into thinking that they will be able to exit at the perfect moment, at the apex of the climb, right before the market craters. For the record, I've never even heard anyone claiming to have done this successfully.

Calling the exact top is a siren song. Even professionals rarely do it consistently. Timing the market is a dream more than it is a strategy.

A better approach is to define what scale of returns should be a signal for you to trim a given investment, then commit to staged selling spread over time after you reach that point. That smooths the execution and cuts regret.

Of course, if you have the fortitude, you can simply sell everything in one click after you've hit your target. But for most investors, it's too hard to pass up on the prospect of getting more returns by holding a portion of their investment just a bit longer. Just be aware that like all parties, alt seasons never go on forever, and it's a bad look (and bad for your portfolio) to be the last one out the door.

Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.