Ethereum Price to Outperform Bitcoin as BTC Dominance Decline Puts Market on Brink of Altcoin Season
Can Ethereum Finally Outperform Bitcoin? | Credit: Getty Images
Key Takeaways
- The Bitcoin Dominance Rate’s MACD has given a specific bearish signal for the first time in history.
- BTCD risks breaking down from a 520-day ascending support trend line, possibly triggering this cycle’s altcoin season.
- Ethereum has reclaimed a long-term support and could outperform Bitcoin (BTC) if it breaks out above resistance.
The BTCD measures the dominance of Bitcoin relative to the rest of the crypto market. Increases in BTCD occur in periods when the BTC price outperforms altcoins, and the opposite happens when BTCD falls. Sharp BTCD falls have historically been considered the start of altcoin season.
While 2024 has been a bullish year for cryptocurrencies, most have underperformed BTC. This is particularly evident when considering that BTC has reached an all-time high while Ethereum has not. However, the recent bearish signal in the BTCD combined with a bullish signal in ETH/BTC as a result of the Ethereum ETF approval could change this.
Ethereum Reclaims Support
The ETH/BTC weekly chart shows that the price has fallen under a descending resistance trend line since September 2022. During this time. the price has traded above the ₿0.052 horizontal support area.
While ETH fell below it last week, it has reclaimed it with the ongoing bounce. The bounce was preceded by a bullish divergence in the weekly RSI and MACD (green), something that often precedes bullish trend reversals.
Now, ETH attempts to break out from the resistance trend line. If the ETH/BTC chart breaks out from this resistance trend line, it could pave the way for an upcoming altseason.
The potential breakout coincides with a BTCD breakdown. Since ETH is the largest altcoin, periods in which it outperforms Bitcoin often cause a drop in BTCD.
The BTCD trend line has existed for 546 days, and the ongoing decrease started after a bearish divergence in both the RSI and MACD.
As a result, the most likely future outlook is an ETH/BTC breakout and a BTCD breakdown.
BTCD Gives a Bearish Signal
The BTCD has increased alongside an ascending support trend line for over 500 days. The upward trend was initially rapid but stalled in October 2023. BTC has traded between 52 and 56% since.
In the beginning of April, BTCD made a failed attempt at breaking out from the 0.5 Fibonacci retracement resistance level of 56.42%. However, it was unsuccessful, leaving a long upper wick in its wake (red icon).
BTCD fell after the rejection and now risks a breakdown below the ascending support trend line. Since the trend line has existed for nearly 520 days, breaking down below it could trigger altcoin season, a period in which altcoins increase at a much faster rate than BTC.
The weekly MACD supports reinforces this likelihood, since it has generated a triple bearish divergence (green), which started once the BTCD upward trend stalled. Such a divergence has never occurred in BTCD’s history, meaning that it can lead to a significant downward movement.
If this hypothesis is correct, it would be logical for the altcoin market cap to break out.
Altcoin Market Cap Reclaims Critical Support
As expected, the Altcoin market cap has increased since April 13, reclaiming the 0.5 Fibonacci retracement support level in the and creating long lower wicks (green icons).
Even though the altcoin market cap has fallen since March 14, the decrease has been contained inside a descending parallel channel. This is a common characteristic in corrective structures.
The likelihood of a breakout is also supported by the fact that the altcoin market cap reclaimed the $1.02 trillion support area and moved above the channel’s midline. It currently attempts to validate the $1.02 area as support.
Finally, the weekly MACD broke out from its resistance trend line (green) and made a bullish cross. While all signs point to a bullish trend, confirming the bullish scenario requires a breakout from the channel.
Ethereum Demand Shows Bottoming Signs
In the past week, the total amount paid in fees to use the Ethereum blockchain has been around 1,000 ETH. This is an extremely low value and notably below the yearly high of 10,000 ETH in March 2024.
In the past 12 months, the only other time ETH fees were this low was in September and October 2023. This is a sign that network activity is falling. This period coincided with an increase in the ETH supply, conforming to the issuance/burn mechanism, since inactivity in the Ethereum network decreases gas fees, resulting in a slower ETH burn.
Since the merge in September 2022, the total ETH supply has steadily decreased. The exception to the downtrend was in September & October 2023, when the supply increased by roughly 50,000 ETH.
As expected, the ETH supply has increased by nearly 20,000 this month since issuance is outpacing the burn.
Furthermore, the ETH price also reached a bottom the last time fees were this low. After 60 days of consolidating between $1,500 and $1,800, ETH began an upward movement in the end of October 2023, culminating with a high of $4,093 in March 2024.
Will Ethereum Outperform Bitcoin?
Ethereum, ranked as the biggest altcoin by market capitalization, holds the key to triggering a fall in BTCD through its outperformance of Bitcoin. The ETH/BTC chart is almost the exact mirror opposite of the BTCD one.
ETH/BTC fell under a descending resistance trend line for nearly 600 days, and also decreased below the ₿0.052 horizontal support area. However, the price is in the process of reclaiming this long-term horizontal support area. If it does, it will likely also break out from the trend line, since it is very close to it.
Moreover, the weekly RSI & MACD have generated a triple bullish divergence. This is a very similar signal to the BTCD one but in the opposite direction. So, it reinforces the possibiltiy that ETH/BTC will break out.
A weekly close above ₿0.055 will confirm the breakout is underway, initiating this cycle’s altcoin season.
Altcoins Finally Primed for Some Relief
To conclude, there are three signal that have aligned and support an upcoming altcoin season. Firstly, the BTCD has generated a bearish signal. Secondly, the altcoin marketcap is in the precipice of breaking out from a long-term channel. Ethereum appears poised to break out from a nearly two-year-long downtrend and potentially outperform Bitcoin.
Confirming this possibility requires an ETH/BTC breakout and a BTCD breakdown. However, all signs indicate that this outcome is the most likely future outlook.
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