Bitcoin has enjoyed a steady climb since the January 2018 correction. However, altcoins have struggled at every turn since the correction.
The pattern is one we have seen play out before.
The historical and well worn [to such a degree that it is getting a little absurd] pattern works something like this:
Bitcoin does well, then Bitcoin stagnates, and alts do well (this period is marked by XRP and ETH doing very well; typically XRP and then ETH in that order with many alts in between).
Then the whole market crashes.
Then Bitcoin comes back, but it “forgets” to take its friends along with it. Instead, alts go down as Bitcoin takes two steps forward, then alts go down some more as Bitcoin takes one step back.
The result is a slow bleed out for most alts and steady gains for BTC over a long enough period to incentive many traders to dump alts for BTC. This then reinforces the cycle.
Then when alts do pop once in a while, people are quick to take gains, as, the alt market is otherwise bearish and unforgiving. This then reinforces the cycle as well.
Then, at some point after the media is a-buzz with Bitcoin mania and altcoin holders are on the brink of giving up, we get a set of events like saw in May – June 2017 or December 2017 – January 2018, and we see altcoins “moon.”
The good news, and to the last point is this: historically this vicious cycle has not lasted all that long (3 – 6 months tops outside of the bearish 2014 – 2016 market).
In other words, since crypto keeps following pattern and cycles, we can assume the cycle will end and a new bullish cycle for alts will emerge. This means all us altcoin lovers out there need some awareness and patience (and ideally a Bitcoin position if and when it breaks-out).
Bearish cycles like the current one have ended in one of two ways in the past.
- They end when Bitcoin has gained enough ground that it stagnates at a comfortable high. This is the best case, as this clears the way for BTC profits to be taken to alts and helps cause an alt boom. When there is lots of value in BTC, alts are cheap, and making BTC gains looks difficult, alts are ripe for a boom.
- They “end” when Bitcoin falls back and takes alts down with it again and the cycle starts fresh. This is the sort of thing that true crashes are made of (as in a case like this, BTC finds reprieve from its correction, but alts never do). If BTC can’t climb back into the $12ks and $13ks, money is likely to flow to fiat, not alts.
The problem we seem to have right now is that things could go either way. Consider, although Bitcoin is stagnating (which tends to be good for alts), Bitcoin is sitting in a key zone filled with uncertainty and heavy resistance. Bulls are waiting for a breakout from that zone toward all-time highs; bears are getting ready to short Bitcoin, and alts aren’t being focused on much at all (and to the extent they are, their fate is very much dependent on BTC anyways).
In times like this, people can hardly bring themselves to FOMO buy XRP again over the same exact Coinbase rumor which spurred on the last XRP run! These are depressing times for alts 😀
If BTC can break through these current levels and find stagnation, then at some point alts are likely to have more room to run.
Until that time, it is likely that we will be stuck in a market that looks a bit like last September – November (slow gains for BTC, slow bleed out for alts with a few green days in-between).
The bottom line here is that the alt market is showing a few signs of being healthy. A few coins are making runs; XRP and ETH have had nice days occasionally. However, mostly this looks like the alt market from September 2017 to November 2017.
Meanwhile, Bitcoin’s movement looks like Bitcoin from September 2017 to November 2017.
If we are, as it appears, in a predictable part of the cycle, then we are likely in for a little more frustration before it gets better.
The good thing is, to end on a positive note is that, if history is repeating, then eventually it is going to work out well for the patient and attentive Bitcoin and alt investors alike.
What happened last September 2017 to November 2017 was Bitcoin ascended toward all-time highs, and then right after that, an intense alt boom occurred.
If that is what the next few months look like for crypto, there isn’t much to complain about from a zoomed out and patient point of view. From a here and now view though, it might make sense to be careful trading alts. When they are on, they come on hard. When they are in offseason, they can be a bit like falling knives – potentially valuable falling knives that we want to catch, but we want to catch cautiously and at the right time.
The moral. Be careful with alts while they are stuck in this pattern… but keep an eye out, as when things turn around there could be a lot of recovery in a short period. If you build an altcoin position now or hold on for dear life, just keep in mind that you’ll need to have some patience.
TIP: In times like these we generally see one or two nice green days for alts a week and we’ll see a few odd alts quickly pump and then dump here and there. If you are nimble there are some short term plays to enjoy. If you aren’t as nimble, keep an eye on longer term moving averages on 6 hour, 12 hour, and 1 day candles to get a sense for when the market is turning around. When it starts to turn you’ll have a few days to weeks of warning, you’ll see XRP and ETH re-take some ground, and you’ll see short term EMAs start trending toward the long terms for many alts in unison on both USD and BTC pairs. In the meantime, initiate thumb twiddling while BTC does its thing.