On January 4th 2019, I’d posted an article about How to Time the Most Profitable Period in the Cryptocurrency Market — “Altseason”
In that article, I talked about how to time exponential markups in Altcoins based on a very useful metric I like to use called Bitcoin Dominance.
According to historical Bitcoin Dominance data, breaking down from the 50% level has resulted in exponential increases in the price of most (if not all) Altcoins in the cryptocurrency market.
And while Altcoins enjoyed a fair amount of gains back then in January — the 50% level never breached.
In this article, I will talk about how the trend in Bitcoin Dominance has developed since my analysis in January 2019 and why it’s important to pay attention to Bitcoin Dominance once again.
This article will be more of an applied and practical illustration of how you can use Bitcoin Dominance regularly to time your cryptocurrency exposure to either Bitcoin or the Altcoin market.
Trends in Bitcoin Dominance over the past 4 months
In my January article, I spoke about how Bitcoin Dominance was at a key level — approximately the 50% Bitcoin Dominance mark.
It is a key level because when Bitcoin Dominance broke down from it in December 2017, we experienced the greatest Altseason of all-time.
To recap, below you’ll find the chart in question:
Every time Bitcoin Dominance is at the 50% mark, it is worth paying extra attention to how you manage your exposure to Altcoins.
Back in January 2019, we saw some interesting action around the 51% level but ultimately the all-important 50% mark wasn’t breached.
In fact, quite the opposite happened — we saw a reversal to the upside Bitcoin Dominance (see Figure 2 below)
January 14th 2019 — Rebound from 51%
Throughout this article, we’ll be looking at Bitcoin Dominance charts on the 1 Week timeframe, where each candlestick represents 1 Week of Bitcoin Dominance data.
As Figure 2 shows, we saw a strong uptick in Bitcoin Dominance, which vanquished all Altseason hopes and dreams.
Because an uptrending Bitcoin Dominance means that money is flowing from Altcoins into Bitcoin.
People are selling Altcoins in order to obtain Bitcoin.
In such case, Altcoins are more likely to shed valuation, decline in price, and lose market dominance.
Which is exactly the opposite of what we can expect in Altseason.
But there is ample insight to glean from Figure 2.
Despite an up-trending Bitcoin Dominance, it was clear that Bitcoin Dominance overall was in a macro downtrend.
In other words, Bitcoin Dominance was making Lower Highs over time, meaning that that was the beginning of a declining tendency in Bitcoin Dominance.
This declining tendency is illustrated by the black diagonal line which I’d anticipated would act as a point of rejection for Bitcoin Dominance in the future.
That is, I expected Bitcoin Dominance to move up towards this black diagonal line, get rejected from it and reverse to the downside.
February 12th 2019— Initial Rejection
Almost an entire month later after Figure 2 was made, Bitcoin Dominance indeed showed signs of initial rejection from this black diagonal trendline.
A stronger rejection from this diagonal trendline would mean that Bitcoin Dominance would reverse to the downside and begin its decline once again.
This would be great news because a cascading Bitcoin Dominance to the downside means capital flowing from Bitcoin into Altcoins, translating into wonderful gains for the latter.
February 19th 2019— Declining Bitcoin Dominance
Figure 4 shows that the black diagonal trendline did indeed offer a confirmed stronger rejection of Bitcoin Dominance, illustrating that the tide of money flow in the cryptocurrency market has shifted once again.
That is, money started moving from Bitcoin to Altcoins once again.
At this stage, it was clear that Bitcoin Dominance would be returning to one of the key horizontal levels of 51% and 50%, continuing its ping-pong movement between the red horizontal lines and the black diagonal line.
March 30th 2019 — At the 50% mark
Since February 12th (i.e. Figure 3), the accelatory decline in Bitcoin Dominance has been drastic but in a good way for Altcoins.
During this entire downtrend in Bitcoin Dominance, Altcoins for the most part have been rallying exponentially all across the board.
Though the decline in Bitcoin Dominance was drastic, it was also controlled. That is, Bitcoin spread out its shedding in Dominance over the course of many weeks since about the beginning of February (i.e. Figure 3).
This is important because this allowed for Bitcoin-to-Altcoin money flow to take place over a longer period of time.
This means that the average cryptocurrency trader was able to enjoy exposure to Altcoins and gain profits from them over a longer period of time.
Steady yet sharp declines in Bitcoin Dominance simply make for better market conditions for cryptocurrency traders to consistently and strategically move their capital from Altcoins that have rallied to Altcoins that haven’t rallied yet.
On the other hand, if you take a look at the long red 1 Week candle at the end of September 2018 in Figure 5 above, Altcoins also enjoyed some rallies during that 1 Week period.
But this period was way too short to really make the most of them before having to once again entirely switch trading strategies and adjust your Bitcoin-Altcoin exposure.
And so in the spirit of principles shared in the previous article, this introduces us to another core principle about Bitcoin Dominance:
The longer the decline in Bitcoin Dominance, the longer the Altseason.
Why we are on the brink of an Altseason
It is clear then that we are on the brink of an Altseason.
But if we really think about Principle 5 and appreciate how steady and controlled the decline in Bitcoin Dominance has been over the past several weeks, then we’ll realise that we’ve technically been in an Altseason ever since that rejection from the black diagonal trendline in early February (ie Figure 3)
After all, Altseason is the time where cryptocurrency traders and investors adopt more of a risk-seeking approach by offloading Bitcoin to the effort to accumulate Altcoins so as to profit from their exponential movements.
This market behaviour occurs when Bitcoin Dominance is declining, as capital flows from Bitcoin into Altcoins.
So we’ve been in a technical Altseason all along.
At this stage, it’s not a case of whether we’re on the brink of an Altseason.
It is more a case of whether Altseason will continue and take the exponentiality of Altcoin rallies to another level.
To do that, we have to witness a break down from the 50% Bitcoin Dominance mark.
April 6th 2019 — Major market decision soon
Throughout this article, we’ve been looking at Bitcoin Dominance charts on the 1 Week timeframe, where each candlestick represents 1 Week of Bitcoin Dominance data.
But to really appreciate what is going on at current levels of Bitcoin Dominance as of this writing, let’s zoom in and look at the 1 Day chart, where each candle represents 1 Day of Bitcoin Dominance data.
Never in the history of Bitcoin Dominance have we seen such ranging between the 50% & 51% levels.
This is an indication that there will soon be a decision that will affect the entire market.
If the 51% mark breaches, Bitcoin will run the show. Capital will flow away from Altcoins and into Bitcoin.
If the 50% mark breaches, Bitcoin Dominance will free fall and Altcoins will have clear skies.
A major Altseason.
We are on the cusp of a major decision in the market.
Altcoins are now at their make-or-break point.
Thank you for reading.