Rising Bitcoin price and volume is not a good news for altcoins market, which has seen increasing selling pressure and low buyer demand.
On Oct. 30, researchers at Santiment pinpointed the growing volume and dominance of BTC, 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 short term, traders think the so-called “altseason” is not returning, especially as BTC outperforms altcoins.
When would altcoins recover?
Historically, during bullish markets, the crypto market saw Bitcoin experience a rapid uptrend first. Then, altcoins followed, after Bitcoin climbed to a local peak or an all-time high.
Traders foresee a similar pattern playing out in the current price cycle, typically expecting altcoins to recover in 2021. But until Bitcoin stabilizes and completes its rally, investors do not see a proper altcoin uptrend happening.
Since Sept. 13 lows, the Bitcoin dominance index has risen 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 it is possible to see an altseason in the first quarter of 2021. 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 volatility of the crypto market. When Bitcoin rises quickly, altcoins fall as capital cycles back into BTC. If BTC falls, then altcoins drop in tandem, putting them in a precarious position.
A pseudonymous trader known as “DonAlt” said he has been short Ether for several days. He said that if Ethereum does not recover against BTC, then a broader altcoin market pullback is a possibility. The trader said:
“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, another trader known as “CryptoCapo” said that the technical structure of altcoins is not compelling in the short term. For traders, that makes Bitcoin more attractive, given that it has portrayed strong momentum throughout this month. He said:
“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 rise rapidly and Ethereum lags behind, an altseason is highly unlikely in the short term.
A strong sign of an altseason can be a consolidation of the ongoing Bitcoin rally followed by a breakout in the price of Ethereum.
Considering that BTC price broke out of the $13,000 resistance level merely a week ago, technically, an Ethereum and altcoin market uptrend could still potentially be several months out.
So far, the capital in the altcoin market still appears to be shifting towards Bitcoin, however. Decentralized exchanges, or DEXs, have continued to bleed volume in October. This shows that the demand for DeFi tokens is slowing down likely due to Bitcoin’s bullish momentum.