Bitcrypto-coin may be regaining dominance over altcrypto-coins


Xeggex

Breaking from the decade-long tradition of Bitcrypto-coin dominance, Ethereum has been outperforming the market in the past few months. While some saw this as the market pricing in the upcoming Merge, others argued that it showed the natural and expected decoupling of the market.

Ethereum’s outperformance was clearly visible through the altcrypto-coin cycle signal, a metric determining the strength of the altcrypto-coin market. Varying between 0 and 100, the altcrypto-coin cycle signal marks Bitcrypto-coin Season and Altcrypto-coin Season.

During Bitcrypto-coin Season, when the signal drops below 50, BTC is likely to outperform the entire altcrypto-coin market. During Altcrypto-coin Season — when the signal rises above 50 — this dynamic inverts and the basket of altcrypto-coins led by Ethereum become the dominant force in the market.

The altcrypto-coin cycle signal is based on the price data of the top 250 altcrypto-coins by market capitalization and excludes stablecrypto-coins. A reading of 0 or close to 0 shows that the market is in Bitcrypto-coin Season, and BTC is expected to outperform all altcrypto-coins. A reading of 100 or close to 100 shows a decidedly Altcrypto-coin Season, where a fall in Bitcrypto-coin dominance is expected. The top 250 altcrypto-coins are expected to outperform BTC.

When the altcrypto-coin cycle signal fluctuates between 20 and 50 or 50 and 80, the market is plagued with uncertainty. Even though a score below 50 indicates Bitcrypto-coin season and vice versa, fluctuating readings show significant potential for a trend reversal.

Currently standing at 79, the altcrypto-coin cycle signal shows that the market is currently knee-deep in Altcrypto-coin Season. However, the signal has dropped significantly in the past two months — throughout July and August — and stood at 100 during the first two weeks of September.

altcoin cycle signal bitcoin dominance
Graph showing the altcrypto-coin cycle signal from October 2021 to September 2022

Dropping below 80 was usually followed by a rapid drop below 50 and the beginning of Bitcrypto-coin dominance. In the past year, the signal never spent longer than a few days fluctuating below 80 before.

However, it’s still too early to tell whether this is an onset of another trend reversal.

Returns posted by large-cap cryptocurrencycurrencies show that money has steadily flowed out of Layer-1 tokens. Large-cap tokens have performed significantly worse than BTC, a trend that correlates with the current altcrypto-coin cycle signal.

altcoin cycle bitcoin dominance market cap returns vs BTC
Market cap grouping returns against BTC

This means that the market could remain in Altcrypto-coin Season. It’s also too early to tell how the upcoming Merge will affect the altcrypto-coin dominance. Ethereum has likely been leading the altcrypto-coin outperformance — if ETH sees its price increase following the Merge, the market could see additional weeks of Altcrypto-coin Season.

However, if ETH sees its price drop after transitioning to a PoS network, the declining altcrypto-coin cycle signal could fall even further and push the market back into Bitcrypto-coin Season.

Posted In: Bitcrypto-coin, Research
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