Bitcoin is well above its former all-time high, but the “alt season” where altcoins explode in value relative to the top-ranked cryptocurrency has yet to arrive.
BTC dominance, a metric weighing all other crypto assets against Bitcoin is facing a pivotal monthly close that could jeopardize any chances of a greater altcoin market recovery. Here’s why the future of alts like Ethereum, XRP, and more, hinges on the December 2020 monthly close.
Bitcoin Dominates Crypto Market Interest, Will Altcoin Season Ever Return?
Rewind to any point over the last three months as a bullish Bitcoin approached $20,000, and most crypto analysts who were around during the last market cycle, fully expected alt season to happen almost immediately after the top cryptocurrency took out its former all-time high.
That moment has come and gone, yet altcoins have only been taken a further beating for it. Many altcoins are increasing in USD value, presenting the guise of positive price growth.
But switching over to the same altcoins trading against BTC, few have managed to perform anywhere near as well as Bitcoin.
A strong Bitcoin while altcoins struggle, results in BTC dominance increasing. The total crypto market cap is roughly $636 billion, of which Bitcoin makes up exactly two thirds currently at 66.7%.
At the lowest reading of BTC.D ever, altcoins left Bitcoin only with a third of the market share, but the tables have since turned. And with Bitcoin more bullish than ever and with an entirely different asset class behind the capital pouring into crypto altcoins are at risk of becoming only a mere fraction of the total crypto market capitalization.
The MACD indicator will cross bullish with a December close above 66.7% | Source: CRYPTOCAP-BTC.D on TradingView.com
Three Technical Indicators Suggest BTC Dominance Will Soon Soar, Crush Alts Further
The first of the bullish (for Bitcoin) signals that could send altcoins further into a bearish state, is the MACD on monthly timeframes pictured above. The short-lived DeFi “summer of love” turned the histogram back red for the first time since July 2018, but as of December, the histogram has turned green again.
Coinciding with the histogram flipping bullish, there’s also a bullish crossover of the two moving averages depicted on the MACD. The last bullish crossover sent dominance from roughly 40% to 70%, and another crossover is forming now. A monthly close is required to confirm the crossover, so there’s still time for altcoin bulls to stop big bear Bitcoin from swatting them down further.
BTC dominance closing above the middle-BB could confirm a move higher | Source: CRYPTOCAP-BTC.D on TradingView.com
Next, the Bollinger Bands on monthly timeframes are also showing just how in danger of extinction altcoins are currently. A close above or below the middle-line moving average can be used as a confirmation to buy or sell.
Assets closing beyond the middle-line often result in the price action tagging the other side of the band. This means that if December closes above the middle-line, a retest of the top band and over 70% dominance is likely. Failing to close through the middle-line, could bring alt season to the crypto market finally.
Ichimoku is giving bullish signals, but BTC.D must get its head above the clouds | Source: CRYPTOCAP-BTC.D on TradingView.com
But if BTC dominance can close outside of the Ichimoku cloud in December, all bets are likely off for altcoins for the time being. When assets trade above the Tenkan-Sen (blue line and corresponding arrow) they’re considered bullish.
The Tenkan-Sen above the Kijun-Sen is also a signal that a bullish trend is underway. The significance of each crossover is depicted with red and green arrows.
Closing above the cloud or “Kumo” on the Ichimoku indicator on monthly timeframes on BTC.D would be a signal of doom for altcoins. The remaining source of hope, however, is also in the cloud itself.
The Kumo projects future price action, and in this case, the cloud being red potentially hints at bearish price action ahead for BTC.D. If the monthly December close on BTC.D ends up above any of the key levels, expect altcoins to remain bearish compared to Bitcoin. But if things reverse from here, and the close is below any of these crucial zones, then an alt season could finally be coming.
Featured image from Deposit Photos, Charts from TradingView.com