Cryptocurrency News

Why Bitcoin’s Next Breakout Might Not Be An Altcoin Season Signal


Bitcoin on April 14 (B T c) reached an all-time high of $64,900 in 2021 after posting a 124.5% gain. However, a 27.5% correction occurred over the next eleven days, marking a local bottom of $47,000.

famous Crypto Fear & Greed Index Hits Its Lowest Level In the 12 months to April 25, it showed that investors were close to “extreme fear”, a complete reversal from the “extreme greed” levels seen during the bitcoin rally above $60,000.

This fall from April 14 to 25 wiped out $200 billion from the altcoin market capitalization. Nevertheless, its subsequent recovery could serve as a guide when bitcoin finally manages to break out of the sub-$40,000 level.

bitcoin price in usd coinbase Source: TradingView

The altcoins posted a similar trend, hitting a low of $850 billion on April 22, but fully back to a high of $1.34 trillion on May 10. There is no guarantee that this pattern will repeat, but there is no better source of information than the recent market.

Altcoin market capitalization, billion USD. Source: TradingView

cheaper is not always better

Many investors believe that altcoins consistently outperform when the price of bitcoin rises, but is this an absolute truth?

Although this has been the case in 2021, bitcoin was the clear winner in the last quarter of 2020 as it outperformed the broader market by 110%. However, analyzing the winners of the late April bull run can provide interesting insights on what to expect for the next rally.

Top altcoin performance from April 22 to May 9. Source: CoinCodex

Among the top-100 tokens, Ether Classic (etc), polygon (diplomat), Wave’s, and Phantom (ftm) was the clear winner. The winners were either scaling solutions or smart contract platforms, and sector leader Ether (ETH) also outperformed the market.

80% of the worst performers were sub-$1 coins which is the exact opposite of normal investor expectations. There is a persistent myth that cheap, nominally priced altcoins will excel during an altcoin rally, but that was clearly not the case.

The worst performance from the top 100 altcoins between April 22 and May 9. Source: CoinCodex

market timing is impossible

Unfortunately, there is no way to predict when the current correction will end, and historically altcoins have generally not excelled during bear trends. This means that calling the Bitcoin price an ‘alt season’ at the first sign of a correction is a wrong strategy that can lead to financial ruin.

A general rule of thumb for an ‘alt season’ kick-off is 30% or more accumulated gains on cryptocurrencies over two or three consecutive days, including Dogecoin (Doge), Litecoin (LTC), and Ether Classic (ETC).

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