- Ethereum (ETH), the native cryptocurrency of the Ethereum blockchain, continues to lag behind Bitcoin (BTC). Historically, every time BTC fluctuates, altcoins are trending upwards with larger upside price movements. So when will the altcoin season begin?
Ethereum (ETH), the native cryptocurrency of the Ethereum blockchain, continues to lag behind Bitcoin (BTC). Historically, every time BTC fluctuates, altcoins are trending upwards with larger upside price movements. So when will the altcoin season begin?
This time around, Bitcoin clearly outperformed the altcoin market, especially in December. BTC market cap dominance rose to a recent one-year high of 70%, largely due to huge sales in XRP last week.
The difference between Bitcoin’s current price trend and previous bullish cycles in 2018 and 2019 is interpreted as BTC’s involvement in price discovery.
How do bitcoin and altcoin markets move together?
Simply put, price discovery is when the price of an asset exceeds the previous high and continues to enter the unplanned zone. Altcoins often become stagnant when Bitcoin goes into price discovery because BTC absorbs the volume in the altcoin market.
While Bitcoin is rising rapidly, it also tends to major short-term retracements. The problem for altcoins is that when BTC rises it falls behind BTC and altcoins typically see even bigger corrections when BTC retracts.
In the foreseeable future, it is critical for the altcoin market to see ETH gain momentum against Bitcoin. If it occurs in the near term, this will likely start the next altcoin season.
At the moment, Ethereum is still underperforming against Bitcoin. Most broad timeframes, including the daily chart, are still showing no signs of a breakout on the ETH / BTC pairs.
Therefore, the ideal scenario for the altcoin market is to see the ETH / BTC pair hit bottom and then go up to altcoins to see renewed momentum.
Altcoin season may not be possible in the near term
Cointelegraph Markets analyst Michael van de Poppe stated that investors are currently afraid to buy altcoins due to market dynamics. He also highlighted that the ETH / BTC pair is still showing weakness in the latest ETH technical analysis.
The Ethereum weekly chart shows a clear break below the BTC pair support, suggesting that more weaknesses are likely for altcoins. Poppe noted that the ETH / BTC pair must rise above 0.026 BTC to regain bullish momentum.
Ideally for ETH, recovery of the 0.026 sats level would show strength and greater continuity, so traders should watch this level first, according to analysts. If that doesn’t hold, the next area to watch is the $ 450 zone as well as the 0.021 sats zone.
There is a strong argument that the “lower season” may not appear in the 1st quarter of 2021.
Bitcoin is now 25% above its 2017 high, and Ether is still 50% below its 2017 ATH. https://t.co/IIuU9KEEs0
— Ansel Lindner (@AnselLindner) December 25, 2020
Some analysts say the profits from Bitcoin will not return to the altcoin market this time around, as Bitcoin sees a rally led by institutional investors.
However, some traders expect altcoins to become more attractive in Bitcoin rallies. One trader known as “Salsa Tequila” noted that altcoins historically performed well in the first quarter after BTC peaked in December, and if Bitcoin continues to fluctuate, capital could return to altcoins.