It’s been an explosive week for the altcoin market, but not for Bitcoin.
As Bitcoinist has extensively covered over recent days, a number of altcoins have surged higher. This list includes Dogecoin (DOGE), Chainlink (LINK), Synthetix (SNX), Cardano (ADA), and VeChain (VET).
The recent price action has convinced some investors that an “altcoin season” is taking place. The term refers to the extremely strong price action of altcoins relative to Bitcoin in 2017 and early-2018.
But there are purportedly tell-tale technical signs that the “altcoin party” is over.
The Altcoin “Party” May End Soon, Says Analyst
Altcoins have been on a tear over the past few days as aforementioned. This has been marked by a sharp drop in Bitcoin dominance, the percentage of the cryptocurrency market made up of BTC.
But a trader says that the “altcoin party will end very soon.” He identified four reasons why this is the case. They are as follows:
- Bitcoin dominance has reached a weekly support horizontal.
- BTC has traded in a single range for over 70 days. BTC is likely to break the range soon and lead the market.
- Market volatility is “at lows only seen 4 times since 2017.” Again, BTC is likely to lead the rest of the crypto market.
- Q3 has historically been bearish for Bitcoin. When BTC falls, altcoins often fall further.
There has also been an increasing number of prominent investors and executives coming out against altcoins in recent weeks.
Kevin Rose, a general partner at True Ventures, said to TechCrunch in June:
“The problem is that 99% of the projects out there and a lot of the people who are behind them are just in this for the pure financial gain. And there’s a lot of garbage out there. And that’s unfortunate because it really drags down the high-quality projects, and it muddies the space quite a bit.”
This sentiment has been echoed to a T by others, including trader “Joe007.” He said there is likely to be a “s**tcoin mass extinction event to precede the next Bitcoin rally.
Bitcoin Could Boom as Altcoins Retrace
Bitcoin stands to benefit from an altcoin retracement.
Kelvin “Spartan Black” Koh, a partner at The Spartan Group and a former Goldman Sachs partner, said that altcoin profits often cycle into Bitcoin:
“We have seen a major re-rating in many of the smaller altcoins (esp DeFi ones) in the past 4-5 weeks while BTC has been range bound. At some point, the valuation of these alts will start to look frothy and the capital will flow back to BTC.”
Risk appetite is returning.
We have seen a major re-rating in many of the smaller altcoins (esp DeFi ones) in the past 4-5 weeks while $BTC has been range bound.
At some point, the valuation of these alts will start to look frothy and the capital will flow back to $BTC.
— Kelvin Koh (@SpartanBlack_1) June 9, 2020
That’s not to say that money will stay in BTC.
But if crypto investors want to cash out their altcoin profits and still want net long exposure to this asset class, they are likely to hold Bitcoin. Ethereum, too, may potentially be a viable option for holding.
Featured Image from Shutterstock Price tags: xbtusd, btcusd, btcusdt Chart from TradingView.com Bitcoin Analyst Shares 4 Reasons Why the Altcoin "Party" Will End Soon