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Altcoin Season Delayed, but Bullish Momentum Holds Promise

Published
Valdrin Tahiri
Published
By Valdrin Tahiri
Edited by Ryan James

Key Takeaways

  • Altcoin season started in January 2021 in the previous cycle.
  • The Altcoin Market Cap (ALTCAP) trades in a corrective pattern
  • Is there any hope for an altseason in the current market cycle?

The ongoing crypto market cycle has been dominated by Bitcoin (BTC) and meme coins. Since meme coins do not have a significant share of the cryptocurrency market cap, the Bitcoin Dominance Rate (BTCD) has increased considerably in the current cycle.

The much-publicized underperformance of Ethereum has waned the hopes of a possible altseason starting this year. Let’s look at some important charts that can help ascertain if one will follow this cycle.

Altseason in the Previous Cycle

Altseason can be defined as a period when the altcoin market cap increases faster than Bitcoin.

Starting in Sept. 2020, 119 days after the halving, the Bitcoin price began to appreciate, increasing by 310% in 84 days (black). While the altcoin market cap also moved upward, it did so at a much slower rate of 180%.

In this period, the Bitcoin Dominance Rate (BTCD) increased because altcoins underperformed.

However, the actual altseason started in January 2021 (black icon) after BTC suffered its first minor correction.

In the 49 days following that (green), BTC increased by 37% while the ALTCAP by 111%. This was the first portion of altseason.

Then, the most rapid portion of altseason lasted 70 days (yellow).

During this time, BTC barely moved, but altcoins increased by 194%. The altcoin season lasted for four months, with a brief weekly decline in between.

Altseason Cycle
Custom Weekly Chart | Credit: Valdrin Tahiri/TradingView 

In the current cycle, there have been 168 days since the halving, but the price of BTC and that of the altcoin market cap have fallen for 210 days. So, the current cycle is dissimilar to the previous one concerning altcoin season.

Currently, the Altcoin Season Index indicator gives a reading of 33 , indicating that we are still very close to Bitcoin season.

Can Altcoins Break Out?

The altcoin market cap has fallen since the March yearly high of $1.27 trillion. The decrease is contained inside a descending parallel channel. On Aug. 5, it led to a low of $721 billion.

At the time, the ALTCAP seemed to have broken down from its channel. However, ALTCAP bounced afterward, creating a long lower wick (white circle) and reclaiming the channel.

Besides the price action, the wave count is bullish. According to it, ALTCAP has completed a fourth-wave pullback and started its fifth and final wave.

If this is true, the altcoin market cap can increase by 82%, reaching the 1.61 external Fibonacci retracement of the decline.

Well-known analyst Dentoshi  also believes a breakout from the current pattern will lead to a massive price rally.

Altcoin Market Cap
ALTCAP Weekly Chart | Credit: Valdrin Tahiri/TradingView 

ALTCAP must break out from the channel despite the bounce to confirm its upward movement. If this were to happen, it would also turn the Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD) bullish.

Currently, the RSI has broken out from its trend line but is still below 50, while the MACD attempts to make a bullish cross at 0.

Bitcoin Dominance Top

Finally, the chart that points to an imminent altseason is that of the Bitcoin Dominance Rate, which has created several signals that could lead to a bearish trend reversal.

Firstly, the wave count is bearish. The most likely count shows a five-wave upward movement (white) nearing completion, where wave five is an ending diagonal. The ascending wedge that creates the diagonal is ending, as evidenced by the sub-wave count (black).

Secondly, the weekly RSI and MACD have generated lengthy bearish divergences, increasing the likelihood of a decline.

Finally, the price trades inside the 0.5-0.618 Fibonacci retracement resistance area, a likely area for a reversal. The wedge’s resistance trendline is also inside this area.

Bitcoin Dominance Rate
BTCD/USDT Weekly Chart | Credit: Valdrin Tahiri/TradingView 

So, the BTCD readings suggest that despite their underperformance, altcoins will likely begin a period in which they will outperform Bitcoin soon.

A breakdown from the wedge’s support trendline at 56% will confirm this.

Altcoin Season Still Possible

Even though the current cycle has not been kind to altcoins, the BTCD shows signs of a potential top.

Along with a potential breakout in the altcoin market cap, the combination of the two movements could finally lead to a several-month altcoin season.

Read More: Altcoin Season Set to Finally Start in Q4 — Here’s Why

 

 

Disclaimer: The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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