After brushing its all-time level, Bitcoin corrected slightly as predicted in a previous article. This slim adjustment comes in tandem with a falling BTC dominance, making investors and traders potentially more interested in altcoins. The term “Alt season” has been widely chattered among crypto forums and discussions, especially recently with the second wave of the crypto bull. If Bitcoin breaks its all-time high soon, what will happen to prices across different cryptocurrency classes?
Bitcoin Technical Analysis – What happened during the weekend?
Bitcoin price declined on Saturday 22nd from USD 18,700 all the way to USD 17,600 with a price decrease of almost 6% but managed to recover within 1 hour to go back above the USD 18,000 psychological price. Today, the price lies back around the consolidation level of USD 18,700. The upcoming move of Bitcoin is very crucial not only in determining what happens to the price of Bitcoin, but what happens to the entire crypto market as a whole.
Bitcoin Dominance Index – Why it matters to Altcoins
Whenever we talk about Bitcoin dominance, it basically shows the market capitalization of Bitcoin relative to the whole cryptocurrency market. Some people might think that whenever BTC dominance decreases, it means that BTC prices decreased. While that is sometimes true, this fails to portray different events that happen in the cryptocurrency market, specifically after the rise of DeFi. Whenever the BTC dominance decreases in recent times, it shows a stronger rise of altcoins.
This is specifically true with the case of XRP, which lagged when Bitcoin and other cryptocurrencies rose and started a strong uptrend, the price of XRP was still ranging in its consolidation price between 20 and 28 cents. When XRP price broke its 30 cents price and became the 3rd cryptocurrency by market cap (surpassing Tether by this move), we notice a drop in BTC dominance in figure 2. There were of course other cryptos that lagged and started their uptrend a bit late with XRP, but that was the EXACT case from back in 2017, where XRP prices lagged behind most cryptos in the market.
As a general rule of thumb, technical traders usually look for opportunities in the market, specifically in this case, where they would short BTC and long ALTCOINS when the general crypto market is in consolidation, because if the whole cryptocurrency is in decline, this trade would be worthless.
Bitcoin supply is in shortage! Will this boost prices further up?
Bitcoins are known to be scarce. There will be only 21 million bitcoins ever. Currently, there are 4 million bitcoins already lost, with 14.5 million in circulation.
Because Bitcoin prices are directly affected by supply and demand for this coin, if there is a huge demand, its price will significantly increase, and vice versa. Institutions are already stacking up on Bitcoins, owning almost 4% of the total Bitcoins, while big banks such as Deutsche Bank already stated that investors are leaning towards Bitcoin rather than traditional investments in commodities such as Gold.
Popular investor and Mexican Billionaire Ricardo Salinas recently tweeted that 10% of his liquid assets are in cryptocurrencies.
With all the above events happening, it is very normal to assume that cryptocurrencies are set for an extended uptrend. Altcoins are starting to rise, Bitcoin showing strong momentum, and this year contrary to 2017, there is not much hype from the masses, rather a solid stocking from institutions. The coming days are crucial in determining what might happen to the cryptocurrency market…Will it be able to break previous highs? A consolidation at current levels is a good signal of a further extension of price increases, but sudden price drops might instigate FUD across investors, potentially dumping and selling resulting in a short-term bear.
Stay Ahead, Stay Updated
Rudy Fares
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