By CCN.com: “Alt season” is one of the most profitable phases of the cryptocurrency market cycle. It is a period when all altcoins – from large-cap to small-cap – go through exponential growth, often at the expense of bitcoin.
We experienced this phenomenon early this year, until bitcoin’s parabolic rise over the last few weeks shattered many altcoins to the point of capitulation. With many large-cap coins suffering tremendous losses, it is easy to assume that altcoins are bearish. However, nothing could be further from the truth.
A closer analysis of the altcoin market cap and the Bitcoin Dominance Index reveals that altcoin season remains in full swing.
In a nutshell, the Bitcoin Dominance Index represents the market share of bitcoin in comparison to the total market capitalization of all cryptocurrencies.
Many traders looking to grow their BTC stockpile rely on the dominance index to analyze how altcoins will perform against the king of cryptocurrencies. If the index is in an uptrend, it means that other coins are likely to perform poorly against bitcoin – and vice-versa.
A look at the weekly chart above reveals that the index is still bearish from a macro perspective. It appears to respect the long diagonal resistance at 60 percent. Take note: this diagonal trendline has been in existence since February 2014. The trendline previously acted as support, but the index has struggled to recover past that mark since plunging below it in April 2017.
The fact that the bulls succumbed to this resistance even after bitcoin’s parabolic run tells us that the index is still bearish. Our bias is affirmed as the bears also manage to recover the horizontal resistance of 58 percent. On top of that, the weekly RSI of the index is overheated.
These signals tell us that the Bitcoin Dominance Index has topped off and is likely to correct in the near future. This assumption plays well with our narrative that alt season is not yet over.
The altcoin market cap represents the market share of all cryptocurrencies except bitcoin.
With the Bitcoin Dominance Index flashing signs of weakness, the altcoin market cap is looking bullish. It broke out of a rounding bottom pattern on the weekly chart after five months of consolidation when it breached the $100 billion mark on May 15, 2019.
As the breakout rally faded on May 16th, the crypto market went into consolidation. Even with the pullback, the bulls successfully retested $100 billion as support. They are now building a base around that level.
These are incredibly bullish signals for crypto tokens not named “bitcoin.” The price action tells us that bulls are preparing for the next leg up.
Our bias is confirmed by the weekly RSI. The technical indicator broke out of a large inverse head-and-shoulders pattern when it breached resistance of 56. The last time the weekly RSI went above 56, the altcoin market cap went on a vicious parabolic run.
Bitcoin’s rise has forced many to relinquish their altcoin holdings. If you’re in the same thought process, it might be best to wait out the storm. The Bitcoin Dominance Index is topping off while the altcoin market cap is gearing for the next move up.
The surging altcoin season is far from over.
Disclaimer: This article is intended for informational purposes only and should not be taken as investment advice.
Last modified: June 14, 2020 11:17 AM UTC