So jumping straight into it, for those who do not know me, my name is Cactus and I mainly post technical analysis over on twitter based around cryptocurrency and bitcoin in particular. This morning (5th August 2019) I decided to upload a chart based around the recent power of Bitcoin dominance and someone requested an article on my thoughts, hence this is why you are reading this article.
This image (Diagram 1.0) shows dominance breaking major resistance
Firstly the most apparent thing we can see is that Bitcoin dominance has now clearly above 65 for the first time since 'July 2017' over two years ago. This level has acted as resistance since breaking below and many assumed this is where we would see some kind of relief for dominance to let altcoins get some momentum and trigger a so-called 'Alt Season'. If you are unfamiliar with the 2017 altcoin season and how it came to be it was mainly a side effect of price action from bitcoin, you see as Bitcoin headed straight to $20,000 people started making insane amounts of money and as soon as people wanted to sell to take profits especially as traders spotted a potential top around $19,000, the amount of money flowing out of bitcoin and into other assets was 10x the market value, causing huge insane spikes in both volume and price. This caused a trigger effect and inevitably everyone was squeezing their BTC for altcoins.
Dominance dropped (Diagram 1.1) as people swapped Bitcoin for Alts
Shown in the image above is the huge dominance drop we saw as people spot sold their Bitcoin because they made insane profits which needed to be diversified into other projects and coins, leading to a huge surge in volume and market cap.
So taking into account the previous altcoin cycle and how it came to be, looking at 2019 my opinions are pretty much neural at the moment, possibly leaning now to more blood for alts. Firstly dominance on bitcoin has not only breaking above 65 but has now clearly used this level as support before now heading higher and breaking 70, we know from a TA standpoint that when PA can use previous resistance as support its shows clear signs of strength. Secondly, this bear market has put a lot of positions underwater on both Bitcoin and Altcoins, I would assume that most holders are only just breaking even with this move or still underwater completely which was not the case during the 2017 alt rally.
What do we need?
In my opinion, an altcoin rally could be a few months or even a year away, these things take time an especially as Bitcoin needs to make some huge market moves before buyers feel they need to sell positions and diversify due to profits being so large. What is this number? I honestly have no idea, but it probably has to be beyond $20,000 due to that being a place where a chunk of the market started to buy, I would say around $40,000/$50,000 would be a level to watch for people to start diversifying into other projects, causing a chain reaction with sells and inevitably dominance melting down. (This being a complete guess). This doesn't mean we won't see Altcoins have good profits in the meantime, there will be many opportunities for profits and large ones in fact, but something like 2017 to repeat would take a lot of capital much more than previously needed.
So this is my opinion at the moment, I might do a follow-up article on this next month. If you got this far then thanks for reading and here is my twitter : https://twitter.com/TheCryptoCactus.
Stay safe out there and remember, don't go 100x.