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Bitcoin Dominance Rate Breaks Down From 546-Day Support – Altcoin Market Cap Finally Finds Relief

Last Updated May 28, 2024 2:03 PM
Valdrin Tahiri
Last Updated May 28, 2024 2:03 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The Bitcoin Dominance rate (BTCD) broke down from a 546-day ascending support trend line.
  • The breakdown was preceded by a notable bearish divergence in both the RSI and MACD.
  • In combination with the BTCD breakdown, the Altcoin Market Cap broke out from its channel.

The Bitcoin Dominance rate (BTCD) has trended upward for nearly two years, delaying a much-anticipated altseason, a period when altcoins greatly outperform Bitcoin . However, it has been showing weakness in the past two months and broke down from a long-term support trend line this week.

Considering the Altcoin Market Cap (ALTCAP) has broken out just as Bitcoin Dominance experienced a significant breakdown, is it safe to say that the long-awaited altseason is officially underway?

BTCD Breaks Down From Long-Term Support

BTCD had increased alongside an ascending support trend line for the past 546 days. The increase led to a high of 57% in April. However, the upward trend could not be sustained, and BTCD has fallen since.

The decrease was preceded by a bearish divergence in the weekly and MACD. Divergences in such a time frame are rare and often lead to a bearish trend reversal.

Long-Term Breakdown
BTCD Weekly Chart | Credit: TradingView

This week, BTCD is in the process of breaking down from the trend line. If a weekly close confirms the breakdown, it will likely mean the upward trend is over.

In that case, BTCD could fall to the 0.382-0.5 Fibonacci retracement support area between 48%-50%. This would also cause an RSI drop below 50, confirming that the trend is bearish.

If this happens, it will likely lead to relief for altcoins and potentially start altseason.

Altcoin Market Cap Breaks Out

As the Bitcoin Dominance Rate broke down, the Altcoin Market Cap started a movement in the other direction. on May 20 (yellow icon), ALTCAP broke out from a descending parallel channel existing since the yearly high of March 14. On May 23, ALTCAP validated the channel’s resistance trend line as support (green icon) and resumed its ascent.

The daily MACD and RSI both support the continuing of the increase. The MACD has crossed above 0, the RSI above 50 and both are moving upward.

Altcoin Market Cap Breakout
ALTCAP Daily Chart | Credit: TradingView

If the upward trend continues, the next resistance will be at $1.50 trillion. The 1.61 external Fibonacci retracement of the most recent drop creates this target, which would be 12% below the all-time high of $1.70 trillion.

BTCD Reaches Critical Level

The weekly time frame chart shows the Bitcoin Dominance Rate has increased alongside an ascending support trend line since November 2022. The upward movement led to a high of 57% in April 2024, briefly moving above the 0.5 Fibonacci retracement resistance level. The Fibonacci resistance initially rejected BTCD.

Despite the rejection, BTCD did not break down from the trend line. Rather, it bounced above it during the next two weeks and is now attempting another breakout from the 57% resistance area.

The convergence between the trend line and the 57% resistance is in July, meaning a decisive movement is expected to happen soon. Last week, BTCD reached a weekly close of 56.13%, the highest close since April 2021.

Bitcoin Dominance Rate Movement
BTCD Weekly Chart | Credit: TradingView

Technical indicators give mixed readings. While both the RSI and MACD have generated bearish divergences, they are close to being invalidated.

The most likely wave count suggests a breakdown is the most likely outlook. The most likely count implies the Bitcoin Dominance Rate is in the fifth and final wave of its upward movement, which is evolving into an ending diagonal. This is clear from the ascending wedge shape, a bearish pattern often transpiring into ending diagonals.

Wave Count
BTCD Daily Chart | Credit: TradingView

If the count is accurate, BTCD will break down from the long-term ascending support trend line. Conversely, breaking out from the wedge will invalidate this bearish outlook and can trigger an increase toward 60%.

Altcoin Market Cap Can Break Out

In alignment with the bearish BTCD outlook, the altcoin market cap (ALTCAP) gives a bullish reading. The price action shows that after bouncing thrice at the descending channels support trend line (green icons), the altcoin cap reclaimed the $1 trillion support area. This is a critical area since it has acted as support since the beginning of March.

While doing so, ALTCAP also moved above the parallel channel’s midline, a sign of a potential breakout.

Altcoin Market Capitalization
ALTCAP Daily Chart | Credit: TradingView

The RSI and MACD also support the possibility of a breakout. Both are increasing, the RSI is above 50 and the MACD is positive, all signs of a bullish trend. If TOTALCAP break out, it can move toward the yearly high of $1.27 trillion. It will alco confirm the ongoing correction is over.

If the TOTALCAP breakout happens, it will probably align with the BTCD breakout. This will give relief to altcoins and possibly trigger an altseason.

Altseason Drawing Closer

Despite its positive close, the most likely future BTCD outline will be a breakdown of the long-term support and a significant correction. This is in line with the positive readings from the altcoin market cap, which shows an impending breakout.

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