Rising Bitcoin Dominance Signals Caution for Altcoin Investors
If you’re considering purchasing altcoins, you may want to exercise caution as Bitcoin dominance is on the rise once again. Bitcoin dominance, which measures its market cap relative to the entire cryptocurrency market, has historically been a leading indicator of market sentiment. An analysis by renowned analyst Rekt Capital shows that Bitcoin dominance is entering an uptrend continuation, potentially revisiting the 58% mark for the first time in years.
Historical Precedence
Bitcoin dominance has a historical precedent of affecting altcoin sentiment. As Bitcoin’s dominance increases, it indicates waning sentiment toward altcoins. Over the past five months, Bitcoin dominance consolidated within the “retest zone” after experiencing a 10%+ rise since the beginning of the year. However, BTC is now breaking above the resistance zone, suggesting that 58% could be its next target.
Altcoin Liquidity Concerns
When Bitcoin’s dominance rises, it often leads to reduced liquidity in the altcoin market. Reduced liquidity can result in heightened volatility, potentially causing significant losses for investors. Additionally, recent interest appears to be primarily focused on Bitcoin rather than altcoins. In times of capitulation and boredom, investors tend to seek security and liquidity provided by Bitcoin over altcoins.
Insights From Top Crypto Analysts
Crypto analysts Joshua Lim and Miles Deutscher provide further insights into the market sentiment. Lim notes that Ethereum is being suppressed by the rally in BTC/USD, with options volume skewed towards Bitcoin. Deutscher emphasizes that this is a difficult market phase where time capitulation sets in and warns against distancing oneself from the market at this moment. He advises taking a top-down approach, starting with foundational assets like Bitcoin and Ethereum before exploring other altcoins.
Hot Take: Proceed with Caution in the Altcoin Market
With Bitcoin dominance on the rise and liquidity concerns in the altcoin market, it’s crucial to exercise caution when considering altcoin purchases. The historical precedence of Bitcoin dominance affecting altcoin sentiment, coupled with insights from top crypto analysts, suggests that now might not be the ideal time to heavily invest in altcoins. Instead, focusing on Bitcoin and Ethereum as foundational assets could be a more prudent strategy at this moment.
At press time, BTC traded at $28,585.
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