Altcoins plunged steeply on Feb. 14 after the worth of Bitcoin (BTC) achieved a brand new all-time excessive above $49,000.
The timing of the altcoin market’s drop was noteworthy as a result of it corrected as BTC was rallying, which usually doesn’t occur.
So why precisely did altcoins crash?
There are two predominant explanation why the altcoin market pulled again regardless of the energy of the dominant cryptocurrency.
First, when the worth of Bitcoin rallied to a brand new record-high, it sucked out many of the quantity within the cryptocurrency market. This naturally brought about the market to sway in direction of BTC, contributing to the pullback of altcoins.
Second, Ether (ETH), which frequently leads the momentum of the altcoin market, fell sharply in opposition to Bitcoin.
BTC/USD vs. ETH/BTC (orange) 1-hour candle chart. Supply: Tradingview
The mix of those two components, mixed with the uncertainty round Bitcoin on the $50,000 resistance degree, has amplified the promoting strain on the altcoin market.
A pseudonymous dealer referred to as “Kaleo” emphasised that predicting Bitcoin’s rally to $50,000 was arguably easy.
However, whether or not BTC breaks previous $50,000 stays an necessary query that may resolve the path of the crypto market’s near-term value cycle. He mentioned:
“So this transfer as much as just below $50K was extremely straightforward to identify. The true query is what occurs subsequent. I’m leaning towards transient consolidation and breaking out of the vary, however I’m undecided. How lengthy will it take? Does it get rejected? Idk.”
If Bitcoin consolidates first earlier than breaking out of $50,000, theoretically, this development would seemingly profit altcoins within the foreseeable future.
Throughout a Bitcoin uptrend, altcoins are likely to surge when BTC is consolidating after an preliminary impulse rally. Nonetheless, when BTC is rallying or seeing a slight pullback, altcoins typically see massive value drops in opposition to each BTC and the U.S. greenback.
Bitcoin is bullish for now, which is useful for alts
For now, Bitcoin is sustaining its bullish market construction, which might relieve a few of the promoting strain on the altcoin market within the foreseeable future.
Scott Melker, a cryptocurrency dealer and analyst, mentioned that Bitcoin is constant to see consecutive bull flags.
Bitcoin bull flag. Supply: Scott Melker, TradingView.com
Bull flags are a market construction in technical evaluation that materialize when the asset breaks out after consolidating inside a spread.
This usually demonstrates a staircase-like rally that’s sustainable over the long term. Melker mentioned:
“Little bull flags in every single place. Lastly closed above $48,200 after 7 rejections. Consolidation beneath resistance normally results in a break up.”
So long as Bitcoin defends the newly established $48,200 assist space and consolidates between $48,200 and $49,700, one other breakout is extra possible.
If Bitcoin sees one other breakout, this time, the altcoin market is more likely to rally in tandem with Bitcoin after seeing an preliminary dip on BTC’s first impulse rally.