With this article, I would like to take a look back and review one of my articles from 22nd of November. I fully recommend you read this article first before reading any further: Are Altcoins Already Breaking Out?.
At the time of writing, we were in the midst of a breakout of the altcoin market that basically peaked on the 24th of November. Since then, we have entered a sideways movement in the altcoin market, with a huge and very volatile price range. Currently, the total altcoin market capitalization is already testing the upper resistance level of this range again (horizonal red line). Moreover, the uptrend that was established since March 2020 is still intact and the altcoin market capitalization has broken out above the 0.382 Fibonacci retracement level, taking the resistance level at about ~$205 billion.
But in the meantime, Bitcoin has finally clearly declared a new all-time high in the region of $24,000, with a massive breakout of about 23% above its previous all-time high back from 2017.
This is generally a bullish signal for the entire cryptocurrency market. Moreover, it is very promising that Bitcoin is not just firing into new highs, but showing some intermediate stops to form new zones of support and resistance. This behavior indicates that we are not yet in a blow-off top and that there is more room to establish even further highs in the long-term.
Bitcoin dominance chart
But let’s quickly review my article from 22nd of November (Are altcoins already breaking out?). In that article, I mentioned that I had my doubts that a new altseason was already underway. Bitcoin had not yet declared a new all-time high, which was basically the starting point of the altseason in 2017. Moreover, the overall chart setup, also considering the Bitcoin dominance, did not yet anticipate that. I had mentioned that Bitcoin’s dominance was not able to surpass the upper trendline of a long-term downtrend channel for more than a year, and that a rejection at the upper trend line had led to the massive surge in altcoin prices in November. But more importantly, I had shared the following chart of Bitcoin’s dominance.
Let’s take a look on my expectations from this article around one month ago (quote):
“At the very least, the drop in Bitcoin’s market share today provides enough room for another surge in Bitcoin’s price to exceed its previous all-time high, while Bitcoin’s market share does not exceed the upper trend line of the trend channel. This could lead to a double top structure and a renewed rejection of Bitcoin’s dominance and would create an even more bullish signal for the altcoin market.”
Now let’s take a look on the Bitcoin dominance chart once again from today’s perspective.
Bitcoin’s dominance has followed exactly the chart structure that I predicted back in November of this year and Bitcoin’s dominance is now testing the upper trend line of the trend channel again. Accordingly, I am now even more bullish on the altcoin market. Why? Because the chart setup between Bitcoin and the altcoins is now identical to the chart setup from 2017, before the altseason took place.
First, Bitcoin has already broken out to a new all-time high, while most altcoins are still underperforming and are about 70-80% below their all-time highs. Second, it is very likely that today’s weekly close of Bitcoin’s price will confirm a new all-time high on a weekly basis (unless Bitcoin corrects into the sub-$20.000 price range within the next few hours). And third, I fully expect that Bitcoin’s dominance will be rejected at the upper trend line once again. If you want to learn more about what triggered the altseason in 2017, please read my following article: Are Altcoins On The Verge Of A Breakout?.
In my personal opinion, the chart setup is perfect now and it is the right time to finally start a new altseason. But what to expect next? In the following you will find two different scenarios that I have in mind right now.
Scenario 1 – 30% correction of Bitcoin
Scenario 1 is the more likely scenario a the moment in my opinion. If we start an altseason right now, I strongly believe in a broader correction of Bitcoin’s price of about 30% from its current price level of about $24,000.
This would result in a drop into the $16,000 – $17,500 price range for one Bitcoin and would follow the chart structure from 2017. A test of the 0.786 Fibonacci retracement levels seems to be reasonable to confirm the breakout. At the very least, I expect Bitcoin to retest the $20,000 price level of the previous all-time high from 2017. Bitcoin has already been on a parabolic rise in recent days and I think a correction is overdue. In the meantime, altcoins may start to break out and catch up with the market as money flows from Bitcoin to altcoins. Always remember that altcoins are still significantly underperforming the market compared to Bitcoin.
Scenario 2 – Bitcoin will continue to break out to new highs
Scenario 2 seems to be less likely in my opinion. In this scenario, Bitcoin will continue to break out to new highs without a significant correction until it reaches its blow-off top at around $75,000, which is my personal long-term price target (check it out: Cryptocurrency 101 – Bitcoin Halving & Price Prediction). In this case, altcoins will remain flat and an altseason may only take place at the very end of the Bitcoin bull cycle. This was the case for example during the cryptocurrency bull market during 2012 – 2013, in which only one altseason took place at the very end, just before Bitcoin reached its all-time high. Why do I think that this scenario is less likely? Because in this case Bitcoin’s dominance would break above the upper trend line of the long-term downtrend channel, at which it was rejected already 4 times since September 2019. This seems to be unlikely to me because in this case the entire chart structure that followed Elliot wave theory, Fibonacci analysis and trend analysis since 2017 would be broken and no longer valid.
I don’t know if you are already invested in the cryptocurrency market or if you are planning to do so. In general, the long-term outlook looks bullish in my opinion, mainly due to Bitcoin confirming new all-time highs. Considering the two scenarios I mentioned above, it seems to be reasonable to not only invest in Bitcoin or altcoins, but also to apply the principles of diversification on your cryptocurrency investments. In general, emotions play a big role in this market, due to the extraordinary volatility in the market. Frequent corrections in the range of 30-40% are common and occur regularly even in a bull market. So be careful with your investments and never trade based on your emotions only, always include fundamental and technical analysis in your decision-making process.
Please leave me a comment if you like this type of analysis or if you have a completely different opinion. Subscribe to my newsletter or follow me on Twitter if you would like to get a notification when I publish a new article. In the following you will find the links to the other articles again that I mentioned above: