BITCOIN vs. ALTCOINS
I must share this simple knowledge to my fellow Steemiters and crypto currency traders because many investors in the crypto game have very little knowledge of how the market actually operates, and I would like to review some basic concepts to help new and experienced investors alike.
The higher Bitcoin's market dominance is, the less funds people will hold in altcoins. Bitcoin's dominance essentially determines whether Bitcoin is bullish or if alts are. Therefore, alts bleed when Bitcoin's price is soaring and vice versa: altcoins do well when Bitcoin's price goes down. To properly assess and watch the overall direction of the market, the market cap is the determining factor.
For example, the current time is 0427 PT, 2018/03/04 ; BTC's market dominance is 41.6%
Back in December 2017 to January 2018, altcoins made a historical rise and of course, BTC's dominance reached an all time low of 33%! To highlight the importance of BTC dominance even further, when bitcoin was $20,000 USD, the dominance was 67%. When bitcoin's dominance reached 33% on January 15, the price of bitcoin was roughly $9,600.
See how most of the money in crypto moves back and forth from BTC to alts?
Right now, Bitcoin is back over 40% and as the market rebounds and recovers, buyers are looking to Bitcoin and ICOs. This is a cycle that has repeated many times before.
If the cycle will continue again this time,
- Bitcoin will continue to rise slowly until FOMO catches on
- Then, bitcoin rises at a quicker rate
- While BTC pumps, (and the dominance reaches 50-60%), alts struggle
- BTC hits a peak (likely higher than previous $20k) and then money gets moved into altcoins. This is when the altcoin season begins.
This cycle will likely take months to repeat. All the while, Bitcoin and Alts will playout their daily movements. There will be noticeable pumps and corrections, but ultimately, it is all part of a much larger and holistic picture.
I recommend everyone to keep an eye on BTC dominance and the entire market cap. Having a solid understanding of these concepts is imperative for finding ANY success in the world of crypto. You must continuously research and study diligently in order to properly assess the market and from there, make smart and lucrative trades.
GOOD LUCK TRADING EVERYONE!