Why Is Bitcoin Dominance Rising Against Altcoins?

TL;DR

Bitcoin dominance bottomed the week of September 8th and has now closed green for six straight weeks, so the rotation out of altcoins is already underway. When the 60% level was breached a couple of weeks ago, dominance soared higher than most expected. Alt/Bitcoin pairs made a new low at 0.29, and dominance should keep rising through the rest of October.

Transcript

Hey everyone and thanks for jumping back into the cryptoverse. Today we're going to talk about Bitcoin dominance and the final rotation, the rotation we've been talking about for the last few months. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out the sale on into the cryptoverse ... Read More

Key Insights

• Bitcoin dominance formed its low the week of September 8th, matching the long-standing call that the bottom would land in September. Six consecutive green weeks have followed, which is evidence the final rotation is already in progress rather than something still waiting to start.
• The 60% dominance level is the trigger point to watch. When it was breached a couple of weeks ago, dominance soared far higher than most expected, and the next breach of 60% is expected to produce another fast move up.
• A move above a level that many dismiss as just a wick is better read as the market showing where it wants to go. The wick above 60% is described as dominance signaling direction, with participants slowly getting the memo afterward.
• Whether Bitcoin dominance can print a higher high depends on how low ETH goes against Bitcoin. Alt/Bitcoin pairs made lower lows, but ETH/Bitcoin potentially putting in a higher low is what has prevented dominance from taking out its prior high so far.
• Dominance tops are often followed by a wick above them later. That pattern showed up in 2019, when a top was set, wicked above, and then broke through, so the possibility of dominance running back near the highs should stay open.
• Timing matters for altcoins in a way it does not for index investing. With low expense ratio S&P index funds, time in the market beats timing the market, but with altcoins, which behave like penny stocks, timing is everything.
• Many altcoin holders now need a full alt season just to break even on their Satoshi valuation. That is the cost of holding alts through years of bleeding against Bitcoin instead of holding Bitcoin itself.
• There is only one Bitcoin while an effectively infinite number of altcoins keep being minted every day. That scarcity difference is the stated reason liquidity has flowed and will continue to flow to Bitcoin, and if Bitcoin went to zero, altcoins would too.

Questions & Answers

Q: Why is Bitcoin dominance going up right now?

Bitcoin dominance found its low in the week of September 8th and has since closed green for six weeks in a row, which is the final rotation that had been forecast for months actually playing out. The move has been slower than many people wanted, which is why some still doubt it is happening. The 60% level was breached a couple of weeks ago and dominance soared higher than expected, and the underlying driver given is that liquidity flows to Bitcoin because there is only one Bitcoin while altcoins are minted endlessly.

Q: What happens when Bitcoin dominance breaks above 60%?

The 60% level is treated as the key trigger. When it was breached a couple of weeks ago, dominance soared higher, going well beyond what a lot of people thought it would, including many who were convinced 60% would never be reached at all. Those people then dismissed the move as just a wick. The expectation stated is that the next time 60% is breached, dominance will move up quickly again, partly because participants were not ready to accept that the first move might be another higher low.

Q: What determines whether Bitcoin dominance makes a new higher high?

It ultimately comes down to how low the ETH/Bitcoin valuation goes. Alt/Bitcoin pairs have already put in lower lows, but because ETH/Bitcoin is potentially putting in a higher low, dominance has not yet been able to put in a higher high. If ETH falls far enough against Bitcoin, a higher high in dominance becomes a distinct possibility. Regardless of whether that higher high arrives, the current structure is still expected to be a higher low for this cycle.

Q: Can Bitcoin dominance wick above a previous top after topping out?

Yes, and this has happened before. Dominance often wicks above its tops later on. In 2019 there was a top, then a wick above it, and then dominance went through that level. In a later instance there was a top, a wick above it, and then dominance went down. Because of this pattern, the advice is to stay open-minded to the idea that dominance could run back up near the highs even if that outcome is unwelcome.

Q: Does timing matter when investing in altcoins?

Timing is everything with altcoins, which are compared to penny stocks. This is contrasted with buying low expense ratio index funds in the S&P, where time in the market beats timing the market because nobody on the planet, including the speaker and the gurus on Twitter, can consistently time the market. With altcoins, sitting for years insisting they will outperform Bitcoin while watching them bleed against Bitcoin repeatedly does not work, and many holders now need an alt season just to break even on their Satoshi valuation.

Q: What is the outlook for alt/Bitcoin pairs in the near term?

Alt/Bitcoin pairs have gone to a new low at 0.29. Some type of bounce in alt/Bitcoin pairs is expected sometime in November, but for the short term, meaning the rest of October, the view is that you should have your Bitcoin maxi hat on because dominance should go higher. This is framed as a timing call rather than a claim that alts can never bounce, and it fits the broader pattern of alts bleeding against Bitcoin all cycle.

Q: Why focus on Bitcoin instead of altcoins?

Bitcoin is described as the reason the whole space exists, and if Bitcoin goes to zero then altcoins go to zero too. Bitcoin could instead survive and eventually reach a million dollars in maybe a decade or two, but that does not mean the altcoin market will follow, nor that any particular altcoin will. There is an infinite number of altcoins and more are minted every single day, while there is only one Bitcoin, and that scarcity is why liquidity has flowed and will continue to flow to Bitcoin.

Q: Why does the speaker criticize altcoin influencers?

The pattern described is that after a call for higher Bitcoin dominance, influencers say the call is wrong and label the speaker a toxic Bitcoin maxi, then get emotional when dominance rises and alt/Bitcoin pairs fall. The objection is to people who spend years shilling micro caps and penny stock equivalents, tell others to have fun staying poor while their altcoins rise, and then play the victim when those coins drop. The stated motivation for warning people is having personally lost money in altcoins in a prior cycle.

Summary & Key Takeaways

• Bitcoin dominance found its low in the week of September 8th, exactly in the September window that had been called for months, and has since posted six consecutive green weeks. The move is happening, just more slowly than many viewers wanted, and the slowness is why people have not yet accepted that the rotation is real.

• The 60% level was breached a couple of weeks ago and dominance soared well past what many expected, but critics dismissed it as a mere wick. The next breach of 60% should send dominance up quickly because participants were not positioned for another higher low the first time around.

• Whether dominance sets a higher high depends on how low ETH goes against Bitcoin. Alt/Bitcoin pairs put in lower lows, but ETH/Bitcoin potentially putting in a higher low has so far kept dominance from a higher high. Either way, this should still be a higher low for the cycle.