Bitcoin is the world’s first cryptocurrency and continues to be the most dominant one of them all. Its current market cap is more than 64% of the rest of the pack combined. Altcoins or alternative coins are a range of other cryptocurrrencies that came out after Bitcoin itself. They mostly borrow the code directly from Bitcoin itself with some new changes made to differ from it primarily. It is widely expected that Bitcoin’s price index and performance triggers the increase in altcoin prices as well but altcoins are known to gain a lot in the same time as Bitcoin does, making them more volatile and thus much more promising for short term gains.
Traders normally alternate between altcoins and Bitcoin constantly to increase their total Bitcoin accumulation. However, all of this contemporary trading could be affected adversely as Bitcoin may eat away at the other coins’ shares and thus tremendously outperform them to the point of altcoins facing huge price downtrends. Bitcoin’s share of the total coin market cap is always an indicator of how Bitcoin will perform against the altcoin market.
When the Bitcoin’s share of the market falls drastically, some form of correction is observed once again that re-establishes the dominance of the number one cryptocurrency. According to some experts, this latest drop in Bitcoin’s share of the market will end for a short term and put pressure back to the altcoins. As a result, Bitcoin’s price bound above $10,000 or a price tank below that figure will trigger an extreme reaction from the altcoins and in the short term as they won’t be able to keep up with it thus causing a lot of selling pressure. This selling pressure may result in double digit price decrease for the altcoins and thus decreasing their overall share of the market cap.
So, if you are betting a lot on altcoins’ performance in the short term, beware as the selling pressure may come soon and wipe out your gains. The wedge breakout observed in the case of Bitcoin’s domination index is a well-documented historic indicator that traders use often. It is best to avoid being on the wrong side of history for once.
Image source: pixabay.com
Don’t worry, we hate spam too
one weekly digest, just the important stuff.