How Bitcoin dominance could retrace and trigger an altcoin bull market ๐จ This article is 5 years old...
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How Bitcoin dominance could retrace and trigger an altcoin bull market
5 min read
Updated: Nov. 7, 2019 at 2:51 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
In 2019, Bitcoin decoupled from the rest of the crypto market, with its dominance rising to 70 percent for the first time since December 2017. Will the trend continue, or will the pioneer cryptocurrency reach an exhaustion point that triggers a renewed “altseason?”
Market dominance
Bitcoinโs rise to dominate began in December of 2018. Since then, BTC gained 327 percent from a low to $3,200 to a high of nearly $14,000. Meanwhile, most altcoins are sideways or down relative to Bitcoin.
According to some pundits, Bitcoin dominance will supposedly reach 80 percent while altcoinsโ role in the market fades, as stated by Max Keiser, host of RTโs Keiser Report. As a result, the former Wall Street trader believes investors should sell their altcoins for BTC.
#Bitcoin dominance 68.2% – heading to 80% – as alts die in favor of BTC. The 2014-2017 era of alts and hard forks is dead. Donโt be the last to rotate out of alts into BTC.
— Max Keiser, tweet poet. (@maxkeiser) August 6, 2019
Looking at the 1-week Bitcoin dominance chart, it seems Keiserโs advice could be sound. An ascending triangle began forming under the 1-week timeframe at the trough of the correction in 2017 (at the time, BTCโs dominance was at a historic low of 35 percent).
Even more bullish, Bitcoin broke out to the upside of the ascending triangle and could be targeting a 38.7 percent upswing that takes it up to 80 percent market dominance, similar to what Max Keiser forecasted.
That said, the TD sequential indicator is giving a bearish signal in the form of a green nine. This technical index predicts a one-to-four weeks correction. Based on this bearish signal, BTCโs dominance could drop significantly, allowing altcoins to gain as capital flows out Bitcoin. Nonetheless, a green two candlestick trading above a preceding green one candle could invalidate the bearish signal given by the TD sequential indicator, allowing the uptrend to continue.
Itโs worth noting that since late 2017, the last four times the TD sequential indicator gave a sell signal (in the form of a green nine) three were correct.
The first happened the week of Nov. 6, 2017, which resulted in a 25 percent plunge from a market share of 65.6 to 48.5 percent. The second sell signal occurred the week of Mar. 26, 2018, taking dominance from 50.2 to 38.7 percent. The last retracement was the one in the week of Sept. 17, 2018, which dropped BTCโs market share from 58.8 to 51.3 percent.
Although Bitcoinโs dominance is currently in a bearish posture, altcoin dominance is sitting in the โgoldenโ retracement area based on the Fibonacci retracement indicator.
Following the correction that began in January 2018, altcoinsโ dominance over the market recently reached the 61.8 and 65 percent Fibonacci retracement level. This Fibonacci retracement zone represents a pivotal point for the altcoinsโ dominance trend. A significant correction, like the one just experienced in this area, suggests that a rebound could be underway.
If validated, the rebound could have the potential to take the altcoinsโ dominance up to the 50 or 38.2 percent Fibonacci retracement level. However, a break below the golden retracement level is a signal of a trend reversal from bullish to bearish, which could lead to a major drop in altcoinsโ market valuation.
Price Analysis
Bitcoin developed an Adam and Eve double bottom pattern on its 12-hour chart, which was validated the moment it moved above $10,800. The pattern is considered a bullish reversal formation, occurring after the price of Bitcoin dropped on July 17 to $9,070 (forming the V-shaped valley). Then, the price rose to $11,100 on July 20, then pulled back again to form a wide, more rounded valley near the price of the first one from July 23 to Aug. 2.
As buying pressure increased, BTC broke above the middle peak of the Adam and Eve double bottom pattern signaling that it was targeting $12,500. On Aug. 6, Bitcoin went up to $12,330, which is very close to the target given by the bullish reversal formation. Thus, the Adam and Eve double bottom pattern can be considered complete. Upon its completion, this pattern predicts a pullback to the breakout point, $10,800, which could happen at any moment since the cryptocurrency recently hit a low of $11,100.
In the meantime, the top four altcoinsโEthereum, XRP, Bitcoin Cash, and Litecoinโseem to have entered a consolidation phase since July 15, 2019. On the 12-hour chart of these altcoins, the Bollinger bands appear to be squeezing, which indicates that they are indeed consolidating. Squeezes are followed by periods of high volatility. The longer the squeeze the higher the probability of a strong breakout.
If Bitcoin is bound to retrace to $10,800 support, the altcoins could enjoy a price increase, which will align with what can be seen in the dominance charts. Nonetheless, the top four altcoins appear to be in a โno-tradeโ zone and a break below support or above the resistance could help determine the reality of the next โaltseason.โ
For the last month, Ethereum has been trading between $199 and $235. While it remains in this range trading risk is heightened. A move with a spine in volume below $199 or above $235
While ETH remains trading in this range, any trade poses an extreme level of risk. A move with a spike in volume below $199 or above $235 will lift the no-trade zone.
Along the same lines, XRP is stuck between $0.30 to $0.33 without any major price action. Breaking below $0.30 could take it down to $0.24, or lower, while a move above $0.33 could take XRP to $0.38 or higher.
Bitcoin Cash, however, can be seen making higher highs and higher lows since July 15. But, this is only with low trading volume and low volatility. Thus, it will be wiser to wait for a break of the support or resistance level before betting on the direction of the coin.
Finally, Litecoinโs price action over the last month has been characterized by a $20 rise and fall between $83 and $103. An increase in volume could allow LTC to trade outside of this range, allowing to clarify whether it is bound to go up or down.
Overall sentiment
Even though Bitcoinโs weekly dominance chart is sitting in a bearish posture based on the TD sequential indicator, it is still too early to tell if this bearish signal will have the potential to trigger the next โaltseason.โ As can be seen in the 12-hour chart of the four altcoins, they have all entered a consolidation phase without any clear signs of which direction they will break out in.
Therefore, under the current market conditions, waiting for confirmation on Bitcoinโs bearish dominance signals combined with indicators from Ethereum, XRP, Bitcoin Cash, and Litecoin is preferable. With the right confluence of factors, another altseason seems possible.
Nevertheless, if ETH, XRP, BCH, and LTC move below support and BTC continues inching up in dominance, then BTC dominance may reach a staggering 80 percent, as Mike Keiser predicted.
Bitcoin Market Data
At the time of press 2:51 am UTC on Nov. 7, 2019, Bitcoin is ranked #1 by market cap and the price is down 6.72% over the past 24 hours. Bitcoin has a market capitalization of $189.54 billion with a 24-hour trading volume of $18.07 billion. Learn more about Bitcoin ›
Crypto Market Summary
At the time of press 2:51 am UTC on Nov. 7, 2019, the total crypto market is valued at at $281.22 billion with a 24-hour volume of $54.81 billion. Bitcoin dominance is currently at 67.45%. Learn more about the crypto market ›
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Bitcoin
$96,730.36
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Bitcoin Cash
$485.116
Bitcoin Cash (BCH) is a cryptocurrency created via a fork of the Bitcoin network.
Litecoin
$89.2258
Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world.
Ethereum
$3,328.69
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
XRP
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Theย XRP Ledgerย is a decentralized cryptographic ledger powered by a network of peer-to-peer servers.