Understanding Bitcoin Dominance And ‘Alt Season’

6 min readJun 1, 2022

Bitcoin leads and altcoins follow. That is the current state of the crypto market until proven otherwise. In this edition we’ll delve into the significance of Bitcoin dominance while considering macro economic factors, and a couple of altcoin setups.

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent.

Thank you for reading.

Feel free to contact me with feedback on contact@chrisoncrypto.com.

Eurozone Inflation Higher than 1970s; Jumps to Record 8.1% in May

Eurozone prices marched higher in May, with inflation hitting an all time high for the seventh consecutive month as the ECB loses its monetary grip.

The astronomically high reading for the month came from preliminary data from Europe’s stats office on Tuesday, up from April’s 7.4% and higher than expectations of 7.8%.

Read the full article here!

Technically speaking

Bitcoin Dominance & Altcoin Cycles

The Bitcoin dominance chart (BTC.D) is somewhat of a meme as it is not traded. Still, it reflects aggregated data that provides an overview of capital allocation and flows in crypto. As such, BTC.D can offer a rough estimate as to where Bitcoin and altcoins become attractive to buy or sell relative to each other.

Bitcoin dominance hit a 7-month high last week, holding a total of 47% of the total crypto market cap at the time of publishing. When crypto turns into a seller’s market, altcoins bleed versus bitcoin and experience more drawdowns in USD terms. The obvious reason for increased altcoin volatility is their smaller market size and maturity relative to Bitcoin. A smaller market cap means it’s easier to move the market and that’s precisely what happens.

However, Bitcoin market dominance ebbs and flows depending on a number of variables, such as the risk-on/risk-off macro economics discussed in a previous newsletter-analysis.

In mid May 20221, BTC.D formed a floor at 38%, where market participants started preferring to hold Bitcoin over other cryptocurrencies. Since then, the 44th percentile acted as a pivot which tended to have consequential follow-through depending on the market’s interaction with that level.

Currently, BTC.D rests at 46.8%, and given the underlying conditions (including monetary tightening which started today), it’s reasonable to expect these confluent factors to be tailwinds for ongoing consolidation into Bitcoin until conditions change or pivotal levels are reached. This is not to say alternative cryptocurrencies cannot rally in Dollar terms, but that they’ll likely underperform relative to Bitcoin.

That said, the market reaction at the 50th percentile would be pivotal for altcoins. If BTC.D falls from this level, a rotation into alts would likely ensue and this would be reflected in Dollar terms. A relief rally in BTC/USD (up to the 200-daily EMA) would be one catalyst for an ‘alt season’, so to speak.

On the other hand, if BTC/USD retreats back to $29,500, or gains momentum beyond the pivotal moving average, BTC.D would likely gain further ground as the market retreats or ‘fomos’ into Bitcoin. In the latter scenario, BTC.D would likely top out at 56%, at which point altcoin musical chairs can start all over again (on steroids).

This ought to set the tone for altcoins until further notice (i.e. until 50% BTC.D).

Ethereum Eyes $2,200

Given the above backdrop, Ethereum/Dollar is understandably an inferior trade to Bitcoin. But here are the levels to watch regardless.

ETH/USD is trending outside its macro falling wedge formation at the time of writing. Price fell to $1,700 and is essentially on standby and awaiting orders from BTC/USD like the rest of the altcoin market.

A local reclaim of $2,000 would open the door to $2,200 while retaining a posture of consolidation & accumulation. An unambiguous reclaim (and retest) of the H4 200-EMA would open the door to $2,500. Failing that, $1,700 and $1,350 are back on the table since the sell-trend needs to be contended with until it ends.

A weekly close above $2,500 unlocks $3,250 and $4,000.

Litecoin Upside Capped at $250

Litecoin/Dollar closed a bearish monthly candle at $68, flipping the monthly super-trend to a sell-signal. Assuming the worst is over (it may not be) and that LTC/USD will range from here, it’s reasonable to expect the initial retest of the monthly-super trend to be met with strong resistance. Until this trend flips bullish, Litecoin is capped at $250 (nearly a 4x from current prices).

Locally (H4), LTC/USD deviated below $64 and got bought up into an order-block of accumulation near the $70 area. The asset’s first immediate test would be a reclaim of the H4 200 EMA which currently sits at $77.

A successful reclaim and retest opens the door to $95 (prior support turned resistance). Once reached, expect sellers to defend the level. And while a $100 LTC would be useful in grabbing headlines, an initial rejection should be anticipated pending more favourable conditions which are likely to come this year since central bankers have exhausted their monetary tools box (tldr: brrr incoming). On the other hand, if LTC/USD retreats below $64, then $52 and potentially lower levels are on the table.

But in the grand scheme of things, LTC/USD tends to experience explosive peaks and troughs which may be captured on higher time-frames with a minimalist strategy.

Per the above chart, the 50-daily EMA tends to be a deciding factor as to whether Litecoin rallies or not. If LTC/USD is capped at $250 (at the time of writing), then reclaiming this moving average opens the door to a 200% move, potentially within 6 months.

I won’t bore you with more fundamental reasons why Litecoin is a superior asset to 99% of cryptocurrencies this time, but here’s a primer.

p.s. This is my opinion. It is not financial advice.

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