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Altcoin Season could be upon us
It's not just the lackluster performance of BTC after the ETF approval that seems to indicate this, the BTC.D chart suggests a major trend change for the coming years as well.
I identified a pattern that can be divided into 3 phases. It now indicates a longer sideways movement after BTC.D had a 1+ year long rally taking it from 39% to 56%. After this second phase it should conclude with a bigger correction taking dominance levels back to at least 40% - and also leaving room for a potentially much larger drop.
BTC.D
As always, the 4 year pattern of the BTC halving is evident in the chart. We can see the bull cycle peaks with the blue arrows on the bottom. We can immediately identify a clear pattern in the chart: a green rising phase ~1.5 years after the peak, a ~1 year long phase of consolidation without a clear trend as well as a red falling phase ~1 year before the peak.
We can also see that dominance levels have been in decline overall with it being near 100% before 2017! This is also visible by the red falling trend line connecting previous peaks. This makes a lot of sense to me since BTC.D should be overall expected to trend downward: while BTC was the first coin and will always be the pioneer, it's clear that the tech behind it is now quite outdated. ALTCOINS will always have the advantage of innovation and should therefore be able to capture more of the market share over time.
Price is now once again converging on that downward trend line and is likely now entering a ~1 year long consolidation phase. As seen in the last cycle, this was actually marked by a strong downward movement lasting for a year, followed by a brief but strong upward momentum. But even if we should not see such a decisive downward movement, this would still suggest that altcoin season has started. It's peak would be expected just before the peak of the bull cycle in 2025.
Will BTC.D bottom out at 40%?
If the idea of a generally strengthening altcoin market over time proves to be correct, it is quite reasonable to assume that BTC.D will go quite a bit lower than 40% as indicated by the blue support line in the chart above. This support seems rather strong, so we could also see a bottom in that area, but if we zoom out, it's clear that there is still a lot of room to the downside!
In fact, if we look at what happened in the past, the red phase does seem to have the potential to take dominance levels much lower. There is probably going to be a reduction in the amounts of those drops over time. The first one was a 60% drop, the second a 35% drop and a third one could be as high as 20-25% taking BTC.D to around 30-35%.
Again, such a development seems reasonable to me and it would still take another 8 years for levels to fall to around 10%. What I imagine seeing for the more long term future, is that these levels will continue to fall until we reach around 5-20%. I would then expect a sort of stabilization to occur since Bitcoin will likely always be of relevance. That being said, I can also see a crazy green phase taking us back into the 70s or so - volatility will always be a thing in this space. Nevertheless, I would be surprised if levels would stay that high for longer periods.
As a general reminder: Please keep in mind that none of this is official investment advice! Crypto trading entails a great deal of risk; never spend money that you can't afford to lose!
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