Ethereum and the altcoin market are stagnant relative to Bitcoin, with the ETH/BTC pair being the key to the next altseason.
Altseason on the way? Why is Bitcoin leaving large altcoins like the Ethereum behind MARKET ANALYSIS
Ether (ETH), the native cryptomeda of blockchain Ethereum, has lagged behind Bitcoin (BTC). Historically, when BTC rises, altcoins tend to rise with higher price movements.
This time, Bitcoin has clearly outperformed the altcoin market, especially in December. BTC’s dominance of market capitalisation has recently increased to the year’s high of about 70%, largely due to the large sale of XRP last week.
BTC/USD vs. ETH/BTC (yellow), LTC/BTC (orange), XRP/BTC (blue) 1-day candle chart (Bitstamp). Source: Tradingview
The difference in price discovery of Bitcoin
The difference between the current Bitcoin price trend and previous Bitcoin Bank bullish cycles in 2018 and 2019 is that BTC has gone into price discovery.
Put simply, price discovery is when the price of an asset exceeds the previous high and continues to enter unknown territory. Altcoins usually stagnate when Bitcoin enters price discovery because BTC sucks the volume out of the altcoin market.
Also, when Bitcoin is growing rapidly, it is also subject to large short-term setbacks. The problem with altcoins is that when BTC increases, they fall behind BTC, and when BTC retreats, altcoins often see even bigger corrections.
In the foreseeable future, it is critical for the altcoin market to see Ether gain momentum against Bitcoin. This would probably kick off the next altseason if one arises in the short term.
Currently, Ether is still underperforming against Bitcoin. The ETH/BTC pair, in most time periods, including the daily chart, still shows no signs of breaking up.
Daily Chart ETH/BTC (Binance). Source: TradingView.com
The ideal scenario for the altcoin market is to see the ETH / BTC pair forming a fund and then go out to the altcoins to see a renewed momentum.
Cointelegraph Markets analyst Michael van de Poppe pointed out that traders are currently afraid to buy altcoins due to market dynamics. He also stressed in his latest ETH technical analysis that the ETH/BTC pair is still showing weakness.
He added that the weekly chart on the Ether shows a clear collapse below support on the BTC pair which suggests further weakness for altcoins is likely. Poppe noted that the ETH/BTC pair would have to rise above 0.026 BTC to regain the bullish momentum.
„However, as long as the ETH remains above 0.021 sats, the bullish arguments can still be made for higher, as the upward construction would still be intact,“ he explained, adding:
Ideally for ETH, a recovery from the 0.026 sats level would indicate further strength and continuation, so traders should look at that level first. If that doesn’t work, the next area to observe is the 0.021 sats zone next to the US$450 region.
When will we have an ideal scenario for the altseason?
Indeed, there is a strong argument to be made that the so-called „altseason“ might not even appear in Q1 2021.
In fact, there is a strong argument to be made that the so-called „altseason“ might not even appear in Q1 2021.
Bitcoin is now 25% above its maximum in 2017, and Ether is still 50% below his ATH in 2017. https://t.co/IIuU9KEEs0
– Ansel Lindner (@AnselLindner) 25 December 2020
Some analysts say that since Bitcoin is experiencing a recovery led by institutional investors, Bitcoin’s profits will not return to the altcoin market this time.
However, some traders expect altcoins to become more attractive with Bitcoin bullishness. A trader known as „Salsa Tekila“ said that capital could turn back to altcoins if Bitcoin continues to rise, considering that altcoins historically performed well in the first quarter after the BTC peak in December. He wrote:
„The higher the BTC $, the more attractive the altcoins become. BTC’s current market capitalization is 6.5X the ETH market capitalization. $ rotation factor is plausible, especially coming in 2021 with the popularization of the $ ETH picket. The likelihood of a peak would be to catch altcoins as they detonate during a large bitcoin end. ”