BITCOIN VS ALTCOINS
Updated
Since the beginning of 2023 BITCOIN has been on a relentless upward trajectory. As the highest market cap cryptocurrency it often sets the tone for the entire market. When Bitcoin goes up it tends to drag the rest of the market up with it and the same when Bitcoin falls is the general rule of thumb.
This post is to showcase the difference between Bitcoins market cap (TOTAL) Vs the Altcoin market cap which excludes Bitcoin and Ethereum (TOTAL3). As the market leader Bitcoin is often the first mover and that can be seen in the chart on the left, we have at first glass a mirror image on the TOTAL3 chart on the right but with a few key differences:
- When Bitcoin fell from its ATH in November, price found it's bottom at the previous cycles ATH as seen by the blue horizontal ray. Whereas the altcoin market continued to drop below its previous ATH by another 19.67%. It's an important difference because it shows that altcoins are worse off in a bear market when compared to Bitcoin, and they start from further back once the Bullrun arrives.
- We can see that both charts are very similar, the next biggest difference is clearly the progression made in this Bullrun so far. Bitcoin has already moved past its "right shoulder" of the head and shoulders price pattern, TOTAL3 however is still some ways off that mark, the chart shows altcoins have a 38% gap between current level and the top of that "right shoulder".
The reason for the gap in the race can be explained the same way each cycle because they're exactly the same patterns each cycle. Bitcoin is the first mover as it is the biggest by market cap, the same cycle of capital injection happens each and every time:
BITCOIN ----> LARGE CAPS ----> MID CAPS ----> SMALL CAPS
Profits get rotated into the next more risky investment over and over until the blow off top and retail are left holding their positions all the way down. This will most likely still be the case this cycle however there is a new player on the field...
BTC ETF's...
This is new and exclusive to this cycle and I believe this will partly change the dynamic of the cycle when compared to years gone by. With over $10 BILLION DOLLARS of net inflows into BTC the institutional buyers are now here in a much bigger way than ever before, how will this disrupt the money flow? It could prevent profits from rotating somewhat into the large caps, but not completely. Naturally the ETF providers will have a large stake in the holding of BITCOIN and are going to be less inclined to sell when the cycle looks to near its end as they are still providing the service to their customers. Having less sellside pressure will help BTC hold its value.
The altcoins may get the negative side of this as less profits in theory will rotate into smaller cap coins and result in a smaller 'Altseason". This is the cost of institutional adoption. There is always the possibility of altcoin ETF's but that is another discussion. For now I can see altcoins playing catch up later this year and going into 2025.
This post is to showcase the difference between Bitcoins market cap (TOTAL) Vs the Altcoin market cap which excludes Bitcoin and Ethereum (TOTAL3). As the market leader Bitcoin is often the first mover and that can be seen in the chart on the left, we have at first glass a mirror image on the TOTAL3 chart on the right but with a few key differences:
- When Bitcoin fell from its ATH in November, price found it's bottom at the previous cycles ATH as seen by the blue horizontal ray. Whereas the altcoin market continued to drop below its previous ATH by another 19.67%. It's an important difference because it shows that altcoins are worse off in a bear market when compared to Bitcoin, and they start from further back once the Bullrun arrives.
- We can see that both charts are very similar, the next biggest difference is clearly the progression made in this Bullrun so far. Bitcoin has already moved past its "right shoulder" of the head and shoulders price pattern, TOTAL3 however is still some ways off that mark, the chart shows altcoins have a 38% gap between current level and the top of that "right shoulder".
The reason for the gap in the race can be explained the same way each cycle because they're exactly the same patterns each cycle. Bitcoin is the first mover as it is the biggest by market cap, the same cycle of capital injection happens each and every time:
BITCOIN ----> LARGE CAPS ----> MID CAPS ----> SMALL CAPS
Profits get rotated into the next more risky investment over and over until the blow off top and retail are left holding their positions all the way down. This will most likely still be the case this cycle however there is a new player on the field...
BTC ETF's...
This is new and exclusive to this cycle and I believe this will partly change the dynamic of the cycle when compared to years gone by. With over $10 BILLION DOLLARS of net inflows into BTC the institutional buyers are now here in a much bigger way than ever before, how will this disrupt the money flow? It could prevent profits from rotating somewhat into the large caps, but not completely. Naturally the ETF providers will have a large stake in the holding of BITCOIN and are going to be less inclined to sell when the cycle looks to near its end as they are still providing the service to their customers. Having less sellside pressure will help BTC hold its value.
The altcoins may get the negative side of this as less profits in theory will rotate into smaller cap coins and result in a smaller 'Altseason". This is the cost of institutional adoption. There is always the possibility of altcoin ETF's but that is another discussion. For now I can see altcoins playing catch up later this year and going into 2025.
Note
Since BTC has hit ATH and we had a sell off on the news, Bitcoin has steadied itself around the mid 60k's. This generally gives altcoins the greenlight to push on and catch up, as the chart suggest the altcoin market still has a long way to catch up and this will be a good opportunity to do that.The AI narrative coins will see the best gains in my opinion at least in the short term and will contribute towards the altcoin markets rally.
Note
Since posting this idea in late FEB, both TOTAL & TOTAL3 have respected previous key levels set by the last Bullrun rally.TOTAL is moving between 2.169T - 2.577T, each month without fail alternating between green and red candles bouncing between the two levels.
TOTAL3 is still lagging behind in terms of chart structure, it's had similar chop but finds itself at support after a harsher selloff compared to BTC (TOTAL).
This tells me a few things for the short term and the long term:
- short term we may have found our support level for altcoins and there is a definite pattern with BTC fluctuating between 2 key levels each month.
- Long term it's clear to me that because BTC is still leading altcoins in terms of market structure and recovery of market cap you could call it. This tells me we have not yet completed even the first stage of the cycle, the "BITCOIN" stage. Once we see TOTAL 3 begin to mirror that of TOTAL we would have gone through something of an "alt season" to make up lost ground, alt season is a traditionally late stage section of the larger cycle and knowing this it points to we are still in the beginning phase of the cycle.
Now it is important for me to note that alt season does not historically last anywhere near as long as the general BTC dominance stage of the cycle. Usually it's a manic frenzy that lasts a few weeks and culminates in a blow off top beginning the bear market. According to the charts displayed we are still some ways off that. For me, the ETH ETF will certainly help to begin the rotation into ETH but the buying of BTC is definitely not over.
In conclusion we have a clear mini range for TOTAL and a clear support level for TOTAL3, we can also see that alts have not yet caught up with BTC and therefor we are not near the end of the cycle, we are still nearer beginning stages.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.