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Bitcoin's dominance has increased compared to the altcoin's dominance in the last week leaving Bitcoin at a 10% high in the last week.
Last updated Feb 28, 2023 at 01:08 PM
Posted Feb 28, 2023 at 01:00 PM
Bitcoin dominance is strengthening in comparison to altcoin dominance as Bitcoin marketcap hits $469 billion. Among the alts, Ethereum is bullish on a weekly timeframe with 7% gains. The overall market showed a mixed response this week leaving the market direction indecisive on shorter timeframes.
Looking at the Bitcoin dominance chart this week, it's evident that it's forming a symmetric triangle with higher lows and lower highs. On an hourly chart of Bitcoin dominance, this symmetrical triangle reflects a period of market indecision, with the price of Bitcoin compared to altcoins fluctuating within a smaller range. The triangle pattern is created by drawing two trendlines that converge to form a triangular shape. As the price moves toward the apex of the triangle, this pattern is typically taken as a hint of a potential breakout in either direction. Traders will frequently seek a decisive move above or below the trendlines as a hint of the direction of the market's next substantial move. If the breakout occurs to the upside, it could indicate a continuation of Bitcoin's dominance in the market, and a potential increase in the price of Bitcoin relative to altcoins. On the other hand, a downside breakout could indicate a shift in market sentiment towards altcoins, and potentially a decrease in Bitcoin's dominance.
In the current scenario, if there’s a breakout before the converging point of the triangle pattern, it can move in either direction. If it breaks downwards, there’s good support at 43.90% or if it breaks upwards, it can try to update its previous high of 44.7%. In both scenarios, however, we can’t predict the direction of the overall crypto market. The dominance only shows the cash flows in Bitcoin. Even if bitcoin receives less percentage of the money coming to crypto, the market can still go up and altcoins enjoy all the attention meanwhile.
On an hourly chart, the altcoin dominance chart is forming a descending triangle pattern, which could indicate that the price of altcoins compared to Bitcoin is fluctuating within a narrowing range. The pattern could indicate a potential collapse in which the price of altcoins falls in relation to Bitcoin.
The weakening trend of altcoins also signals that Bitcoin Dominance might break upward, taking most of the cash inflows to Bitcoin.
The above chart suggests the same thing: there’s a higher probability of an increase in Bitcoin dominance this week. The symmetrical triangle pattern does not clearly state any direction but the descending triangle on altcoin dominance favors bitcoin dominance. If we compare both charts side by side, it is clear that the last week has been in the favor of Bitcoin and altcoin has been losing cash inflows.
The price of Ethereum appears to be trapped in a value zone at the moment, but the previous trend of higher highs on a 4-hour chart is bullish. Ethereum appears to be consolidating within a range, where it has been making higher highs but is approaching a local resistance level. This means that there is significant selling pressure at a certain level, preventing the price from breaking higher.
Meanwhile, altcoin dominance, which measures the percentage of total cryptocurrency market capitalization made up of altcoins (any cryptocurrency other than Bitcoin), is rising and reaching new highs on a 4-hour chart. This indicates that investors' attention is shifting away from Bitcoin and toward other cryptocurrencies, including altcoins like Ethereum.
Just within the past week, Ethereum has gained over 7%and is one of the top performers among the A-quality altcoins. If we apply the finocchi scale on the Ethereum price chart on the hourly time frame, it has a local support level of 0.786. However, even though the chart above suggests a positive trend, this chart does not favor that idea. Just above the current price level of $1644, all the EMAs (20, 50, 100, 200) are converging and might act as a strong resistance for Ethereum. However, if Ethereum somehow breaks above these, these levels will turn into support and the price might claim the local highs again. Ethereum has resistance at a previous high of $1740 at Fib 1.618 on an hourly chart.
The chart below shows that the price of Bitcoin has been declining, which has resulted in a decrease in Bitcoin dominance (the percentage of total cryptocurrency market capitalization made up of Bitcoin) on a daily price chart. However, with the recent rise in Bitcoin's price, its dominance has begun to resurge.
What's interesting is that, despite Bitcoin's increasing dominance, altcoin dominance (the percentage of total cryptocurrency market capitalization made up of altcoins) is also increasing. This could indicate that investors are becoming more bullish on the cryptocurrency market as a whole, rather than just Bitcoin. However, the trend is visible on the larger time frames only, as the last two days have been rough for the crypto market.
Traders' and investors' attitudes can shift quickly in response to price movements and market conditions. It's not uncommon for traders to have conflicting feelings about market fluctuations because they may have different positions and strategies that are affected differently by market movements. For example, some traders who purchased Bitcoin at a lower price and held it may have rejoiced when the price reached $23,000 last week because it meant that their investment had grown in value. Those who purchased Bitcoin at a higher price and planned to sell it may have been disappointed when the price dropped to $23,000 this week, as it meant they would be selling at a loss.
It is worth noting that, dominance plays an important role in determining who is winning the attention of the investors; however, it says less about the overall direction of the market. What indicators actually predict the market direction? We'll learn about this in another research blog.