Hi guys, it’s been a little quiet around this blog for the last few months as I’ve had a huge workload from my day job since the beginning of the year. As a result, I couldn’t really focus on this blog and since I always want to provide good and well-researched content, I decided I’d rather not write an article instead of writing something that doesn’t meet my personal expectations. Today I want to give another update on the cryptocurrency market and talk about the alt season that is obviously finally happening – Altseason finally started!
Cryptocurrency market review and update
My last article about the world of Bitcoin and Co. was from December 20th (Is The Next Altseason Around The Corner?) and a lot has happend since then. Bitcoin broke out to new all-time highs, reaching a price of around $65.000. Ethereum, the second largest cryptocurrency, also broke out into new all-time highs (current price at around $2.400). Affected by the law suit from the SEC, XRP has been in a major depression since the end of last year, losing around 80% of its value from the peak in November 2020, followed by a tremendous recovery rally. Many other altcoins hit new all-time highs as well (e.g. ADA). And Doge – What is going on with Doge?
The total cryptocurrency market capitalization has surpassed the magic number of $1 trillion for the first time in history and has even risen to more than $2 trillion (!) since then. But especially in the last two weeks, altcoins have significantly outperformed Bitcoin – This is it, the start of the altseason!
In my last article, I took a look at the Bitcoin dominance chart and based on that I anticipated a rejection at the trend line followed by a significant drop in Bitcoin dominance, which would mark the start of the altseason.
Moreover, I reviewed two different potential scenarios:
- A 30% correction of Bitcoin, marking the start of an altseason.
- A continued break-out of Bitcoin and an altseason that would only take place at the very end of the bull market.
Scenario 1 seemed to be more likely in my opinion, but obviously the market wrote another story and we are following scenario 2 right now. As I had explained, in scenario 2 Bitcoin would break out into new all-time highs without another significant correction and an altseason would only take place at the very end of the cryptocurrency bull market, just before Bitcoin would reach its blow-off top in the region of $75,000.
At the time of writing, Bitcoin resided at a price of 24,000$. Currently, the price of Bitcoin is at $61,000, almost tripling its values since Dezember 2020 and altcoins are starting to outperform the market significantly.
When did the altseason start?
If we take a look at the Bitcoin dominance chart again, it is obvious that it exceeded the upper trendline of the trendchannel, which I definetly did not expecting. There was a lot of momentum and hype in the market in December last year when Bitcoin marked new all-time highs, which is the reason for this break-out. Nevertheless, Bitcoin’s dominance was rejected at the last high of September 2019 at around 73.5% and quickly reversed back into the trend channel. Actually, this level was also a resistance level back from 2017 and has been tested twice now after the 2017 bull market.
Since then, Bitcoin has been steadily losing market share and we are actually following the chart structure that I predicted back in November 2020 already. From my personal perspective, we are currently in the first wave of an Elliot wave A-B-C correction pattern that could lead to a fall of Bitcoins’s dominance to the lower trend line of the trend channel (~20-30%). The first obvious sign of a starting altseason was when the support level at around 60% was broken, which happened on the 31th of March 2021. This means we are still at a very early stage of the altseason right now.
If we compare the total cryptocurrency market capitalization with the total altcoin market capitalization and the development of Bitcoin, we can clearly identify that since the market correction in March 2021, altcoins disconnected and are significantly outperforming Bitcoin, the leader in the cryptocurrency market.
What can we expect next?
Although many altcoins have already gained significantly in the last two weeks, I think they are the best place to be in the market right now. Bitcoin has already reached almost a full 4.236 Fibonacci extension based on the bear market that followed after the 2017 bull market. Even if Bitcoin were to exceed my personal target of $75.000 (also check out: Cryptocurrency 101 – Bitcoin Halving & Price Prediction) and reached up to a price tag of $100.000, the potential gains from here are „only“ in the 60-65%-range. Furthermore, the risks are always high to buy an asset that has already risen 1.500% in a year.
However, many altcoins are still significantly underperforming the market, residing 50% or more below their all-time highs from 2017 / 2018 (e.g. BCH, DASH, XRP, IOTA and TRX can be mentioned as an example), thus there are still great opportunities in this market. I think in particular altcoins that are still undervalued compared to the overall market performance will continue to outperform and catch up.
In my opinion this will mainly be driven by 2 factors:
- Market rotation of profits into altcoins from cryptocurrencies that already had a significant rally in the last months, such as BTC, ETH, ADA and others.
- New retail traders entering („FOMO-ing in“) the market providing new liquidity and especially buying easy accessible coins that are listed on well-known exchanges, such as Coinbase, Binance, Paypal and Robinhood.
The main question is, how do you play your cards in this market environment for maximum profits? Personally, since the beginning of the year, I have sold some of my well performing positions and reallocated them to underperforming altcoins as mentioned above. In addition, I focused on buying coins that are in the top 30 on coinmarketcap.com, assuming that new retail traders would mainly buy into these coins when they enter the market and look for good coins to buy. So far, this has worked very well for me. However, this is not financial or investment advice and should only be considered as an example. But, I will continue to follow this strategy in the coming weeks.
How long will the altseason last?
This is very difficult to predict, but history shows that most of the altcoins have their most significant rally in the last few days / weeks of the Bicoin bull run. Accordingly, I will be taking a very close look at the Bitcoin price chart in the upcoming weeks. As long as Bitcoin has not reached my personal target of $75.000, I believe altcoins have still more room to surge. Moreover, I expect most altcoins to atleast reach and exceed their previous all-time highs from 2017/2018 in this bull market. Accordingly, as long as these criteria are not met, there is no reason for me to exit the market yet.
Based on Fibonacci analysis, the total cryptocurrency market capitalization could reach a total value of around $3 trillion in this bull market (4.236 Fibonacci extension), adding another $820 billion from today’s perspective. Using the same method of analysis, the total altcoin market capitalization, on the other hand, could reach a total value of around $2 trillion, an increase by another $1 trillion in altcoin market capitalization. Accordingly, there is the potential that the majority of liquidity invested in this market could flow into altcoins instead of bitcoin.
I personally have set up a detailed exit strategy for all my holdings, with clear price targets and quantities that I will sell. My strategy is based on the approach of selling only 60-80% of my holdings, just in case the market continues to rise after my targets are met. This way I am still positioned in the market and do not have to worry about missing out on further gains.
At last, I would like to mention that we are in the most volatile phase of this market right now. Some coins are surging 30%, 50% or even 100% in a day. Significant corrections of up to 50-70% can happen in a matter of hours at this point, so be careful with your investments. Taking profits from time to time is resonable, even if you miss out on some gains. Moreover, some coins without any utility rise several 100% in a week (Doge), while other coins with great communities and utilities seem to stagnate (ADA). There is no logic in the market at this point in time, it is all about hype and FOMO.
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