Bitcoin has resisted dropping below $6k yet again, unfortunately most altcoins from Ethereum down are mostly in panic mode with Ether taking an usually big hit.
Is this a sign of bottoming, a sign of an upcoming wave of capitulation, or a sign of the end times? Hard to say.
From a fundamental perspective it is fairly unclear as to why it would be that altcoins are panicking, especially the king alt Ethereum. In fact, the only things I can think of fundamental-wise are: 1. Ethereum is getting closer to the point where it will need a long awaited upgrade and 2. Ethereum is the platform that many other cryptos are hosted on, specifically tokens that started as ICOs. Anyone who ran an ICO from mid-2017 until now is potentially sitting on losses or is back where they started in Ether and down in their ICO token. Thus there is potential for those who ran ICOs to be selling off their Ether in a panic, selling off their ICO tokens in a panic, and thus generally pushing the market down.
That said, what is happening with alts is probably less fundamental and more technical. Meaning, it has more to do with chart analysis and market cycles than anything that is happening in Ethereum or other alts.
The reality is, what is happening right now is indicative of one type of phase that that can commonly be seen in cryptocurrency market cycles, one where alts lose value against Bitcoin pretty much regardless of what Bitcoin does or what alts do fundamentally (like software updates and such).
Historically the cycle has looked something like this (see: BTC MARKET DOMINANCE HISTORIC LOW !! for the original theory; which I concur with):
1- NEW MONEY GOES TO BTC
2 – BTC BUBBLE POPS
3- MONEY GOES TO ALTS
4- XRP BUBBLE POPS
5- MONEY GOES TO ETH
6- ETH BUBBLE POPS
7- DEEP CORRECTION
8- BTC AT ALL TIME HIGH WHILE MOST ALTS STAY IN CORRECTION.
9- BTC DOMINANCE GETS OVER 50% AGAIN
In terms of “good news,” Bitcoin dominance just reached 50% (although that amount is somewhat arbitrary, it represents a point in which alts drop despite BTC recovering). In terms of “bad news,” Bitcoin isn’t anywhere near an all time high.
That said, even if the cycle above only roughly plays out, we can clearly we see we are toward being between a “deep correction” and “Bitcoin appears to recover as alts stay in a correction” phase.
The XRP and ETH bubbles have popped and are continuing to pop, BTC dominance is above 50% and it is once again resisting $6k (every time that happens it looks more and more like a bottom for Bitcoin).
Assuming we are toward the start of the phase in which Bitcoin does well while alts continue to correct or stagnant, the following points are worth thinking about:
- If the historic cycle plays out it should resolve in epic runs for the alts that make it to the other side (thus, someone with nerves of steel or a belief in crypto would likely want to be looking for the bottom, averaging in, or generally using a strategy to be in alts before any sort of recovery phase occurs).
- If you are early in the phase, you get a chance to buy Bitcoin before it goes up (you can then trade it for alts later). If you go to Bitcoin only, you’ll probably miss out on the lowest alt prices. However, if you then time your move from BTC to altcoins right, you’ll get the best of all worlds.
- If you are late in the phase, you get a chance to buy altcoins dirt cheap with BTC before they go up (or with dollars at a decent price before they go up).
- If you are early in the phase, you risk losing value against Bitcoin by holding alts (which is part of what likely fuels altcoin the sell off in the market).
- If you are late in the phase, you risk losing value against alts by holding Bitcoin (which again, is part of what likely fuels the Bitcoin sell off).
To augment the above, I would also note the following:
- The safest move for the average investor / trader is probably to research coins, average into your picks, and hold. If you can’t quickly trade the 24/7 crypto market without losing your shirt, the grand plan of going to Bitcoin, then alts, then back to fiat just might backfire. Holding a mix of coins with a focus on Bitcoin leaves a lot of room for mistakes (assuming crypto comes back).
- If it is that we are not done with a correction, then cash is clearly the safest move.
- If we are in the start of the phase where Bitcoin out preforms alts (and not already part way through it), being an alt holder could get worse before it gets better. Still, if USD value doesn’t drop much, just BTC value, then there is some logic in holding alts for those who won’t be trying to trade between BTC and alts.
- If it is that the cycle doesn’t repeat exactly, it could be that alts rally sooner rather than later or never rally at all.
- Alts tend to make epic gains when they go up and often when Bitcoin goes up it takes alts at least part way for the ride. So while they may lose value in BTC in the interim, the end result for those who buy anywhere near the bottom has historically been good.
- Anything could happen. Alts could rally sooner rather than later, we could still be in for more “deep correction,” alts could never come back, crypto could never come back, etc. Above is only what has tended to happen over time in crypto’s short history, not what has to happen this time.
All in all, this is an odd place to be and probably stings a bit for anyone who came into crypto late in 2017 (if you came in earlier this all just looks unfortunately familiar).
Altcoins are down 80% to 90% plus in some cases from the height of 2017 – 2018, the technology, awareness, and adoption of these coins is trending up, and the main sticking point is found in the rational fear that prices could be going lower for now.
Anyone who is into crypto wants alts on sale, but no one wants to buy before the actual bottom is in and when Bitcoin is outperforming alts.
It is a rough place to be in for anyone who is holding altcoins, but we have been here before. Last time we were here was fall of 2017. In that time it was better to be in Bitcoin… right up until the moment it wasn’t. Then, very suddenly in December, it all changed as Bitcoin dropped and alts went through the roof. In that time there was almost no price you could have paid for any alt prior to that which would not have resulted in massive gains if you sold the top of the alt market.
Crypto is a high risk game, its switching phases can be brutal and confusing, but one plus is, for better or for worse, patterns tend to play out like clockwork…
Right now everyone is panic selling the top alts, and they are down from their highs, we have been here before and every time it has led to the best time to buy alts in retrospect. How long before that point occurs again if it ever does? That is the question.