Crypto Alert: Watch for This Altseason Indicator’s Next Move
Bitcoin has been stealing the crypto show with its recent rally – with most “altcoins” falling behind the king. But at some point bitcoin will start to slow down. And history suggests this might give the rest of the crypto market a brief window to catch up. The question is when? When can we expect a glorious “altseason”, where Ethereum and other altcoins outpace bitcoin? Here’s a potential altseason indicator that might fire off soon.
Bitcoin Dominance is the key altseason indicator to watch
Bitcoin Dominance (BTC.D, TradingView) measures the percentage that bitcoin “dominates” the rest of the crypto market. When Bitcoin Dominance goes up, it means bitcoin is growing more than the rest of the market. In other words, investors are generally better off holding bitcoin than a basket of random altcoins.
As you can see in the chart below, BTC.D has trended higher all year – with bitcoin now making up more than half of the entire crypto market (about 55%). After all, bitcoin has rallied 160% this year, and it’s been happy days for bitcoin holders.
But the crypto market tends to get really exciting when Bitcoin Dominance goes down. That’s when bitcoin takes the back seat, and lets the more aggressive altcoins drive the rally car. In this “altseason” scenario, investors can make a lot of money in a short space of time by holding Ethereum and other altcoins – right before the next 30-40% crypto crash.
An early altseason signal could “potentially” be brewing right now
The chart below takes a zoomed-in view of BTC.D over the past 3 days. On December 5th, it made an explosive move higher – closing above the top Bollinger Band. This kind of thing is typically a sign of extreme strength. It means volatility is increasing, along with the price (or in this case, the Bitcoin Dominance percentage).
But yesterday, December 6th, something interesting happened. BTC.D opened and closed the trading day above the top Bollinger Band. This doesn’t happen very often with investments. But when it does, it can be an early warning sign that the rally is overheated. You’ll also notice that yesterday’s candle closed pretty much where it started – a sign of investor indecision. So to sum up yesterday’s Bitcoin Dominance move, you have indecision among investors while BTC.D euphoria is at extremes.
What needs to happen for this early altseason signal to fire?
Bitcoin Dominance made a low yesterday, December 6th, of around 54.5% (yellow, in the chart). If it can finish today (or another day this week) below that level, it would suggest a temporary top in Bitcoin Dominance is forming. Think of it as indecision followed by a big decision – in this case in favor of altcoins versus bitcoin.
But here’s where things could get really interesting for altcoins. “If” this top forms, it would then confirm bearish divergence between the Relative Strength Index (RSI) and Bitcoin Dominance.
Essentially, it would mean that sell pressure is getting stronger relative to buy pressure. In other words, the uptrend could be running out of strength. Remember, for a bullish “altseason”, you want bearish divergence on Bitcoin Dominance to help bring it down.
But until that happens, Bitcoin is still in the driver’s seat.
As usual, none of this is investment advice. It’s just my opinion on the market. If you like these quick updates, subscribe to our free newsletter for how-to guides and investment ideas across crypto, stocks, metals, and more.