Bitcoin broke out of the $13,000 resistance level merely a week ago, which means those expecting Ethereum and altcoin prices to rise may have to wait a few months.
Bitcoin (BTC) is sucking up the volume from the entire cryptocurrency market as it continues to rally. This is causing the alternative cryptocurrency (altcoin) market to pullback, which has seen rising selling pressure and low buyer demand.
On Oct. 30, researchers at Santiment pinpointed the growing volume and dominance of Bitcoin, while Chainlink (LINK), Ether (ETH) and Binance Coin (BNB) struggled. They wrote:
“The dominance involving #Bitcoin is continuing to display itself, particularly via trading volume. When comparing other top blockchains in the past day, note the decline in $ETH, $XRP, $LINK, and $BNB trading volume, while BTC's levels stayed high.”
At least in the foreseeable future, traders believe the so-called “altseason” is not returning, especially as Bitcoin outperforms altcoins.
When would altcoins recover?
Historically, during bull markets, the cryptocurrency market saw Bitcoin experience a rapid uptrend first. Then, altcoins followed, after BTC surged to a local peak or an all-time high.
Traders foresee a similar pattern playing out in the current price cycle, generally expecting altcoins to recover in 2021. But until BTC stabilizes and completes its rally, traders do not see a proper altcoin uptrend happening.
Since Sept. 13 lows, the Bitcoin dominance index has increased from 56% to 63.4%, recording a 7.4% increase within two months.
However, Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said an altseason in the first quarter of 2021 is possible. He said:
“Dominance hit the red zone here. Still waiting until December for a top structure on this one. After that -> Quarter 1 altseason.”
The problem with altcoins is the current dynamic of the cryptocurrency market. When Bitcoin rises quickly, altcoins fall as capital cycles back into BTC. If BTC drops, then altcoins drop in tandem, putting altcoins in a precarious position.
A pseudonymous trader known as “DonAlt” said he has been short Ether for several days. He said that if ETH does not recover against Bitcoin, then a broader altcoin market pullback is a possibility. The trader noted:
“I've been short ETH for a couple days now. That said ETHBTC is approaching support. So there is a good chance it bounces here, if it doesn't the entire altcoin market gaps down quite aggressively.”
Similarly, a trader recognized as "CryptoCapo" said that the technical structure of altcoins is not compelling in the near term. For traders, that makes Bitcoin more attractive, given that it has portrayed strong momentum throughout October. He emphasized:
“Let's be honest: There are alts that look really bad, alts that look decent, and alts that look good. I don't see any altcoin that looks really good right now. Choose wisely.”
The key is for the Bitcoin rally to cool down
As long as the price of Bitcoin continues to surge rapidly and Ether lags behind, an altseason is highly unlikely in the near term.
A strong sign of an altseason would be a consolidation of the ongoing Bitcoin rally followed by a breakout in the price of ETH.
Considering that BTC/USD broke out of the $13,000 resistance level merely a week ago, technically, an Ether and altcoin market uptrend could still potentially be several months out.
So far, the capital in the altcoin market still seems to be shifting towards Bitcoin, however. As Cointelegraph reported, decentralized exchanges, or DEXs, have continued to bleed volume in October. This indicates that the demand for DeFi tokens is slowing down likely due to Bitcoin's curren momentum.
via cointelgraph.com
