Lately, I've been thinking a lot about altcoins and what to expect as quantitative tightening (QT) from the Fed finally comes to an end. If you've followed my thoughts throughout this cycle, you know I've always stressed that Bitcoin leads the bull market, which means expecting Bitcoin dominance to go higher for a long time.
My analysis has long been tied to the end of QT. Last cycle, the altcoin market bottomed out against Bitcoin right around the time QT concluded in 2019, even if that low was tested later. This time around, I argued that the continued QT—especially with Powell deliberately slowing the pace to "extend the runway"—has kept altcoin pairs suppressed for longer. Now that Powell is suggesting the balance sheet contraction is finally approaching its end in the coming months, we have to consider what that means for our altcoin positions.
For me, it boils down to two main scenarios for Bitcoin, and in both, the smart money play is to focus on the king.
The first option is the highly anticipated scenario: Bitcoin rallies parabolic, QT officially ends, and rate cuts come. This is the environment that could finally lead to a big bounce for altcoin-Bitcoin pairs—the long-awaited "alt season." The catch is that a parabolic move in Bitcoin first requires liquidity to flow to it, meaning altcoin pairs will likely continue to bleed against Bitcoin in the short term.
The second option, which we can’t ignore, is that the market drops, and Bitcoin falls to the 50-week moving average. In this case, Bitcoin dominance still goes up because altcoins will suffer a much more severe crash (historically 40-50%) compared to Bitcoin’s potential 10% drop.
That's why my strategy is simple: I believe holding a majority of my portfolio in Bitcoin is the safest way to navigate this uncertainty. Bitcoin minimizes my downside risk while still giving me full exposure to the upside. Only if Bitcoin successfully rallies to new all-time highs and confirms the party is still on will I even consider rotating a small portion of my Bitcoin into riskier altcoin assets to try and catch the final leg of the cycle. Until then, hold the king!
