Natural selection not only affects the actual loci under selection but also leaves "footprints" in patterns of genetic variation in linked genetic regions. This offers exciting opportunities for inferring selection and for understanding the processes shaping levels of genetic variation in natural populations. Here we develop analytical approximations based on coalescent theory to characterize the genetic footprint of a complex, but potentially common type of natural selection: balancing selection with seasonally fluctuating allele frequencies. We show that seasonal allele frequency fluctuations can have important (and partly unexpected) consequences for the genetic footprint of balancing selection. As also confirmed by stochastic simulations, fluctuating balancing selection generally leads to an increase in genetic diversity close to the selected site, the effect of balancing selection, but reduces diversity further away from the selected site, which is a consequence of the allele-frequency fluctuations effectively producing recurrent bottlenecks of allelic backgrounds. This negative effect usually outweighs the positive effect when averaging diversity levels across the entire chromosome. Strong fluctuating balancing selection even induces a loss of genetic variation in unlinked regions, e.g. on different chromosomes. If many loci in the genome are simultaneously under fluctuating balancing selection this could lead to substantial genome-wide reductions in genetic diversity. This may be the case, even if allele-frequency fluctuations are so small that individual footprints are hard to detect. Thus, together with genetic drift, selective sweeps and background selection, fluctuating selection could be one of the major forces shaping levels of genetic diversity in natural populations.