Bitcoin looks to have undergone a major shift in moment since it’s sharp correction in May 2021. Perhaps still, the final confirmation needed for this shift is a break above the previous all-time highs, just shy of $65,000.
The key element in this shift in momentum has been the ability of Bitcoin price to establish higher lows and higher highs in price. In the previous newsletter, ‘Bitcoin - A Pivot in Momentum?’, I detailed the technicals which lead me to believe this change in momentum had taken place. I also gave my thesis on Altcoins, as well as Bitcoin Dominance, for the coming weeks.
What we have seen over the course of the last 7 days is bullish continuation from Bitcoin. Currently, Bitcoin price sits at $57,000, an increase of almost $7,000 since last Tuesday. At the same time, we have not seen the same momentum from Altcoins. Bitcoin Dominance has been increasing, and Altcoins in their respective Bitcoin pairs have bled out. In short, currently Bitcoin is dominant.
The above chart for Bitcoin Dominance, on a weekly timeframe, shows how Bitcoin has outperformed Altcoins over the last 4 weeks. Bitcoin Dominance represents the percentage of the overall cryptocurrency market (by market capitalisation) that Bitcoin accounts for. As this percentage increases, Bitcoin is outperforming Altcoins.
I am looking towards a test of the local high, highlighted on the chart above. Bitcoin Dominance found support at the lows of around 40% and has since risen. The local high, around 50% dominance, is a logical place to watch for this move to reach to, and also a logical place to look for a potential reversal of the short term uptrend. A break above the highs could potentially signal a continuation of Bitcoin strength, relative to Altcoins.
Why Another Altcoin Cycle Is Likely
Whilst Bitcoin is showing relative strength in the short term, in the event that Bitcoin continues with a secondary rally this cycle, achieving much higher price levels, I believe it is safe to assume that Altcoins will have another powerful move, relative to Bitcoin.
This is because the Altcoin space is more vibrant than it has ever been in the past. Projects are seeing real usage and real demand, far greater than what has been seen in past cycles. DeFi on Ethereum is a testament to this, with users and businesses interacting with smart contracts and applications on the blockchain, rather than ONLY speculating on the price of Ether.
So with increasingly vibrant ecosystems on blockchains other than Bitcoin, it is my thesis that other blockchains are only receiving more attention and getting more recognition over time, and because of this, they will continue to play an ever increasing role in Cryptocurrency bull markets. Therefore, it is unlikely that we see a bullish display from Bitcoin without the participation of the wider Altcoin space, except for in the unlikely circumstance that Bitcoin becomes the primary and only focus and only utility for blockchain and cryptocurrency.
When to Expect Altcoins to Rally
With the thought process that I have detailed above, the next question is when will altcoins rally? Firstly the Bitcoin dominance chart above, can serve as a great indicator for Altcoin momentum, looking for a dramatic decline in Bitcoin Dominance and a continued decline below 40% dominance should serve as confirmation that the rally has begun.
Aside from Bitcoin Dominance, there is another chart we can turn our attention to - the Altcoin Season Index.
The Altcoin Season Index takes the performance of the top 50 altcoins and compares their performance to the performance of Bitcoin over the last 90 days. It plots their combined performance on a chart from 0 - 100. Each altcoin that outperforms Bitcoin contributes a score of 2. A score of 100 shows that all 50 Altcoins have outperformed Bitcoin over the last 90 days, whist a score of 50 shows that 25 Altcoins have outperformed whilst the remaining 25 have not, a score of 0 shows that no altcoins have outperformed Bitcoin.
I have talked about this chart in detail before and recommend checking out my YouTube video on this metric here:
Essentially, the chart can be used, alongside other data, to determine points at which it is favourable to enter the Altcoin market and when it is potentially favourable to exit (or at least understand that it is not a good time to enter).
Check out the Altcoin Season Index chart below.
Generally, if this chart is below a score of 25, it is more likely to be a good time to enter altcoins, and when it is above 75 it is more likely that altcoins are overextended relative to Bitcoin, and a correction could be coming.
With this, we can say that the closer towards 0 the Altcoin Season Index is, the more likely it becomes that we will see a significant Altcoin rally in the near future.
Currently, the Altcoin Season Index has a score of 41. A stronger indication that Altcoins are due an imminent rally would be if this Indicator continues to trend towards and eventually below 25.
Lastly, Individual Altcoin charts can also serve as a good way to identify price levels at which altcoins may see a reversal from their current downtrend. A great example of this is Cosmos (ATOM/BTC).
In the case of Cosmos (ATOM), relative to Bitcoin (BTC), we are testing a previous horizontal level of resistance as support at 0.00054. From a technical perspective, this is a good level to watch for a potential reversal in the downtrend of ATOM price relative to Bitcoin. These support levels can offer good opportunities to average in or take a trade setup (properly managing risk). Of course, any trade taken is taken at your own risk.
This chart is just an example of how you can analyse specific altcoins specifically, in order to identify individual tokens’ support levels, and therefore, potential levels at which a reversal can occur, and a significant rally could follow.
Personally, I like to look for clean, clear charts. Not all altcoins will have charts that are easy to read. Naturally, some charts will be clearer than others, making them easier to analyse and easier to act on.
That’s everything for this week’s newsletter, all editions of this newsletter are now COMPLETELY FREE for all to read. So subscribe for email updates at no cost to stay up to date with my latest releases.
Also, due to all content now being free, and accessible to all, this newsletter has become reliant on optional paid subscriptions to support it. Therefore, consider a paid subscription option to support me, my YouTube channel and this newsletter further, should you wish.
Thanks, have a good week and see you all in the next edition of the Confident Report.