Bitcoin Dominance Rises: Why Altcoin Buying May Need A Break
October 18 2023 - 6:00AM
NEWSBTC
In a recent trend evident on crypto charts, Bitcoin dominance is
once again on the rise, prompting some traders and investors to
rethink their strategies concerning altcoins. An in-depth analysis
of the data, coupled with insights from prominent crypto analysts,
unveils several compelling reasons to exercise caution when
considering an altcoin purchase at this moment. Historical
Precedence Bitcoin’s market dominance – its market cap relative to
the entire cryptocurrency market – has historically been a leading
indicator of market sentiment. If Bitcoin dominance is increasing,
it means that sentiment toward altcoins is waning. In an analysis
today, renowned analyst Rekt Capital has warned of this flashing
signal, he shared the following chart and tweeted: BTC Dominance
has left the “retest zone”. Now in the process of entering an
uptrend continuation which could see BTC Dominance revisit the 58%
mark for the first time in years. Over the past five months, the
Bitcoin dominance saw a consolidation within the ‘retest zone’
after it saw a 10%+ rise since the beginning of the year. BTC
dominance pulled back as part of its retest which enabled altcoins
to gain some momentum for a short period of time. But, like in
mid-2018, BTC is now breaking above the resistance zone, suggesting
that 58% could be the next target. Notably, BTC dominance peaked
above 71% during the last run in 2021. Altcoin Liquidity Concerns
When Bitcoin’s dominance rises, it often corresponds to reduced
liquidity in the altcoin market. Reduced liquidity can lead to
heightened volatility, with price swings potentially wiping out
significant portions of invested capital. For investors with a
risk-averse profile, such conditions might not be ideal. Related
Reading: Bitcoin Thief’s Decade-Long Heist: Solving The Mystery Of
The Stolen Silk Road BTC Moreover, recent interest appears to be
concentrated primarily on Bitcoin. In times of capitulation and
boredom, investors often seek the security and liquidity provided
by Bitcoin over altcoins. A driving factor for this is that
potential catalysts for the crypto market are Bitcoin-specific,
like the halving and the potential approval of a spot ETF. As these
events play out, Bitcoin will probably continue to outshine
altcoins. More Insights From Top Crypto Analysts Joshua Lim, the
former head of derivatives at Genesis Trading and former head of
trading strategy at Galaxy Digital, recently weighed in on the
ongoing tussle between Bitcoin and Ethereum. “ETH/BTC spot ratio is
a major battleground right now,” Lim noted, adding that the rally
in BTC/USD was effectively suppressing Ethereum. He highlighted a
significant skew in options volume favoring Bitcoin over Ethereum,
emphasizing Ethereum’s diminishing allocator interest (options
volume skewed 5:1 towards BTC). Related Reading: Bitcoin Market Cap
Could Rise By $1 Trillion After Spot ETFs Launch: CryptoQuant
Meanwhile, Miles Deutscher, a well-regarded crypto analyst, offered
a condensed perspective on the prevailing market sentiment. “We’re
in the most difficult market phase… where time capitulation really
starts to set in,” Deutscher remarked. He further cautioned retail
participants who have been distancing themselves from the market,
suggesting that this might be an inopportune moment to do so.
Deutscher added, “Accept that BTC is likely to lead in the early
stages of the bull run… it’s not wise to fade BTC during this
period.” He recommended a “top-down approach to the market,”
emphasizing a strategy that starts with the foundational assets,
Bitcoin and Ethereum, before exploring other altcoins. At press
time, BTC traded at $28,585. Featured image from iStock, chart from
TradingView.com
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