Bitcoin price is currently rising, rocking the crypto market as a whole. In addition to correcting the highest cryptocurrency by market capitalization, altcoins have taken an even bigger blow.
With top alts like Ethereum and Litecoin seeing an even further decline in BTC trading pairs, Bitcoin dominance has formed a bullish candle just as a key technical indicator hit overheating status. The current altcoin season could end abruptly.
Bitcoin price decline leads to the flop of altcoins
Bitcoin is the first cryptocurrency that an entire industry has been built from since then, and anything that is not BTC is considered altcoin. Ethereum is currently the king of this camp and has outperformed Bitcoin since its inception.
However, due to the advantage of the first step and the dominance of Bitcoin, it accounts for more than 50% of the total market capitalization for crypto. The BTC dominance metric was created to measure the rest of the crypto market and its weight compared to all altcoins.
Related reading | After “resetting” Bitcoin, it starts again.
BTC dominance has dropped 18% since late 2020 highs, leaving a red streak. However, during today’s carnage in the crypto market, the metric made a comeback and formed a bullish devouring candle.
A bullish devouring candle is a type of Japanese candle pattern that typically indicates that a short-term reversal is imminent. It occurs when sellers are overwhelmed by a sudden surge in bullish buy after a sharp bearish move. It is then up to the cops to continue the reversal.
A bullish engulfing appears as daily RSI reached oversold conditions | Source: CRYPTOCAP-BTC.D on TradingView.com
The reversal of BTC dominance could end the old season
Simultaneously with the bullish candle pictured above, the daily Relative Strength Index fell sharply into oversold territory. If the BTC dominance reverses, the recent altcoin season will be over.
To add more credibility to the theory of further reversal of the relationship between Bitcoin and Altcoins, a hidden bullish divergence has formed over weekly periods, just as BTC.D touches the lower Bollinger Band.
A bull div on the RSI has formed as dominance falls to Bollinger Band support | Source: CRYPTOCAP-BTC.D on TradingView.com
Deviations occur when the price movement moves against a technical indicator – in this case the Relative Strength Index again in weekly periods. Although the daily has fallen to completely oversold levels, the weekly either has to go further or buyers are secretly showing up to do a reversal.
Counter point | Why bitcoin dominance is no longer relevant for crypto
If bulls can start the comeback with a bullish dip today and finish with a hefty bullish move next week, a doji pattern of the morning star will remain on the weekly charts, adding another signal that a longer reversal may be occurring.
Any reversal of BTC.D could result in Bitcoin leaving alts in the dust or crashing coins far further than the top cryptocurrency on the way down. You just have to wait and see.
Featured image from Deposit Photos, Charts from TradingView.com