Here we go. This is the last opportunity for crypto bulls who like alts to step up and buy, before Bitcoin dominance attempts to take out the high from September and potentially make its way up to the top of the wedge, and 80% dominance. If this happens, it would mean the death of many more altcoins that can't keep up in USD valuations as the bear market trudges on. On the right is Bitcoin dominance, while on the left is ETH/BTC. Here's dominance, zoomed out so you can view the wedge, with targets:
ETH/BTC zoomed out, so you can see where all these supports, resistances, and trendlines originate:
Zoomed in, there's clearly a bullish divergence on the daily Ultimate Oscillator, showing that there could be less strength behind this move down, than the recent move up. An explanation for this is that the altcoin and Bitcoin markets are a bit less correlated than they have been in the past. The dump on the ratio wasn't necessarily caused by people selling alts into Bitcoin, but by people buying Bitcoin and NOT alts. It's important to note that alts actually pumped an entire day before Bitcoin.
Here are a couple more reasons why this is an important opportunity for altcoin bulls: 1) Potentially a failed high on the daily for dominance (and a failed low for Bitcoin ratios). This is supported by a minor bearish divergence on the dominance chart. 2) ETH/BTC has been flirting with a major downtrend (orange) for several weeks. It has briefly broken above it on more than one occasion. This is the first time ETH has made any significant attempts to break this 2-year downtrend. XRP is also flirting with a similar downtrend. These two are the highest alts by market capitalization, so it's important to watch them. I find the middle pink 2017 trendline interesting as well.
If these two signals confirm, altcoin bulls have the opportunity to turn the charts in their favor. Bullish targets are shown in green, with the main target at the larger downtrend (since early 2017). As for dominance, it can fall to the rising wedge support at least. IF altcoin bulls can cause an evening star pattern to form on the dominance chart, it would be a signal that this is a possibility. I would be surprised if dominance didn't test the rising wedge support again before a new high anyway. A larger altcoin surge can occur if the wedge breaks down, and if the secondary downtrend for ETH/BTC is cleared. Bitcoin maximalists do not want this major downtrend cleared, as it would open the gateway towards new all-time lows for dominance.
I must also emphasize that dominance can fall even as USD valuations fall. This analysis is purely about the altcoin/Bitcoin ratios. I also must point out that i've tried to call reversals on altcoins a number of times over the last year and a half. Many of them were spot on short term, but complete failures in the long term. This is not financial advice. I can easily be wrong. This is for speculation and education only.
-Victor Cobra
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Alts are also trying to break out from their downtrend since June. They can easily fail again, but a breakout should send them straight to the 200d MA, around $74 Billion.
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I'll also add that a reason I'm speculating why alts have been doing so poorly is because much of entire altcoin market was built on gains from early Bitcoin holders who were probably young and inexperienced. They threw their money at anything, amplifying their returns. Those people are long gone, or completely ruined financially. Now we have no catalyst for money to funnel into alts, aside from traders trying to jump the gun, expecting something like 2017 to happen again sometime in the future.
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Doesn't look great for alts, particularly on the weekly. Dominance has failed to push higher today so far. If the entire pump is retraced by weekly close, that would set up for another low. The next support for alts is roughly -25% from here.
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What we really want to see is Bitcoin hold above $7700/7800, as that leaves room for the market to start gaining confidence. Only when confidence returns to the market, will altcoins grow.
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We're almost at the wedge support. Perhaps we've even wicked below it, depending on how you draw the line. What happens now should tell us whether or not alts will see a major resurgence. Time to watch closely.
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Today, alts reached and surpassed the 74B target I mentioned in a previous update :)
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The rising wedge support has been reached, which is what I suggested should happen before dominance makes a new high. Now we have to see if alts continue to be sold heavily, or if we can get a true trend reversal. It all depends on whether dominance breaks down or bounces from here.
Looks like dominance has bounced again at the trendline. However, the 50d MA (red) is about to cross over the 200d MA (blue). This has never resulted in a price increase in the short term. If the cross produces even a small move to the downside, the uptrend will be broken. Interesting times for the market! Of course, dominance can pump a lot in a short amount of time, but we seem to be close to a shift in the market. Alts have been moving more aggressively with the market in the last week or two.
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Dominance is really trying to break down here. I have dominance below the uptrend, while TOTAl2 is actually still holding the 200d MA, even though Bitcoin is not. Alts are also well above their channel, whereas Bitcoin has fallen back inside of its own channel.
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Well well well!
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Potential near term targets for ETH
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Looks like a long term top in Dominance is almost confirmed at this point. Even if dominance bounces soon, we're about to experience another death cross on the daily (50/100).
I don't think we'll ever see anything like 2017 ever again. It was basically crypto money printing via ERC tokens where massive amounts of ETH were "hoarded" through ICOs. Realistically, there's only a handful of projects that will exist and it's those that people like to park money into as a storage of value. At this point, I think it's only going to be the major altcoins (i.e. LTC, ETH, BCH, XMR). Possibility XRP too since they've managed to pull it off a few times now.
It's certainly looking like 80% dominance with the Bitcoin halving coming up in a few months.
klimauk
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@XZFAN, can't agree with you at all. LTC is a major coin? hmm... this coin is useless. Anyway for sure we can expect similat grow for altcoins like in 2017. Question is: WHEN.
HouseTarly
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@klimauk, LTC survived multiple bear cycles and is the most liquid altcoin alongside ETH with very good trading volume. It will absolutely have a huge run during the next bubble.
VictorCobra
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@XZFAN, Agreed.
VictorCobra
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@klimauk, Many consider it to be useless, but it soared 700% in 2019 before correcting. It has a lot of liquidity and staying power. It can also be used to observe the post-halving effect. Until XLM was added to coinbase, I used LTC for all my exchange transfers because it was faster and cheaper than Bitcoin.
VictorCobra
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@XZFAN, Thanks for your comment. I'm skeptical as well, and it sure looks that way. As I mentioned in a comment above, I think a lot of it has to do with the crypto hype when Bitcoin cracked 1K again. A lot of "old crypto money" poured into those ICO's and other alts. Something like this can't happen again until there's a lot of new profit to throw around in the market. What do we need for this to happen? New buyers.
Right now, very few people who got in since the end of 2017 are in substantial profit, unless they're really good at trading or bought mostly near 3K. Even those people are only a little bit above 2X, and we need truly astronomical gains for the MAJORITY of crypto holders to cause more money to flow into alts and cause new people to enter the market. I do think alts doing well is good for the crypto space as a whole, including Bitcoin. But right now, we're just not seeing much new retail money entering, as people continue to cut their losses on alts and move back to Bitcoin or out of crypto entirely.
It's possible it could happen again, but the conditions must be met.
HouseTarly
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@VictorCobra, Well said and jives well with the last bubble cycle. It's really difficult to predict the stage we're in at the moment. Though I'm mostly speculating there is stealth buying....mostly in countries with oppressive regimes or in countries experiencing hyperinflation. The good news is that the major coins (BTC, ETH) are slowly becoming more liquid through futures trading and access to IRA Markets (GBTC and ETHE).
I'm expecting ETH to be a huge contributor in the next run given the amount of collateral locked in DeFi. It's amazing that there has been over 1-billion in DAI minted on a decentralized ledger! So I absolutely believe that Ethereum can be a SoV or a place to park money at a later time in the future though at the disbelief of many Bitcoiners ;)
Anyway, thanks for the update. Look forward to your next one as always.
HouseTarly
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Good update. I'm looking at that trendline in the weekly timeframe. Appears to be making an attempt to close below it
It's certainly looking like 80% dominance with the Bitcoin halving coming up in a few months.