Journalist
Posted:
Key Takeaways
What clues does the Bitcoin Dominance give to investors?
It signaled BTC has been weaker than the altcoin market over the past two weeks, but the longer-term outlook confirmed we are a long way from altcoin season still.
Does the rising stablecoin reserve change this outlook?
Not especially, as capital flow continued to be concentrated toward Bitcoin and Ethereum. BTC must stabilize and rally before the market sentiment can shift meaningfully toward greed.
The CoinMarketCap Altcoin Season Index stood at 26 at the time of writing. This showed it was still Bitcoin [BTC] season.
A reading of 75 is needed to confirm an altcoin season. With market sentiment close to panic and sellers in a dominant position, the altcoin market cap continued to shrink by the day.
From its zenith at $1.77 trillion, the altcoin market cap (excluding Ethereum [ETH]) has fallen 28.7% to $1.26 trillion. A recent AMBCrypto report observed that the altcoin market resembled technical devastation.
The percentage of altcoins trading above their 200-day moving average has fallen to bear market levels. It is expected that the drawdown will continue for a while longer before recovery can begin.
Using the Bitcoin Dominance to gauge the altcoin market
Source: BTC.D on TradingView
Bitcoin Dominance (BTC.D) measures the percentage of Bitcoin’s market cap that makes up the total crypto market cap. The higher its value, the more capital concentrated within BTC. A falling BTC.D trend represents altcoin strength.
The weekly structure (orange) of the Bitcoin Dominance was bullish, but it has been falling since July.
At the time of writing, the 61% level opposed further advances of the BTC.D. The most recent rejection from this resistance zone came on the 5th of November.
This meant that, over the past two weeks, Bitcoin has shed more value than the altcoins. This sign of relative strength might mark a market bottom for the altcoins. However, we need more than just the Bitcoin Dominance’s short-term downtrend to call for an altcoin market bottom.
Source: CryptoQuant
Another encouraging, but ultimately insufficient, metric was the stablecoin reserve. Data showed that the reserve of stablecoins on exchanges has been steadily rising since April. This represented increased buying power in the market.
It took a downturn a week ago, falling from $73.9 billion to $71.8 billion at the time of writing. The presence of dry powder to “buy the dip” and a short-term downturn in Bitcoin Dominance is not enough to usher in an altcoin season.
Bitcoin needs to recover and establish an uptrend to assure the market that the bulls still have some power. This, in turn, can turn sentiment towards greed.
Investors seeking greater returns might be induced to buy promising altcoins, establishing organic demand in the altcoin market.
Until the market narrative and the Bitcoin technical outlook change dramatically, an altcoin season would remain canceled.