Hello Traders. In this post, I will be continuing the narrative of how alt seasons are initiated when used in conjunction with the price action of Bitcoin. This is a revised update for 2022 on how we can continue to understand and build upon the flow chart model I have created last year on understanding the flow of money between Bitcoin and Altcoins in relations to the Bitcoin Dominance. With that being said, we may be seeing the first early signs of a potential alt season looming for the coming weeks/months for a major cycle run on altcoins.
We will take a deeper dive into the theory of the Bitcoin Dominance while also respecting my flow cycle that I have previously created last year that is still applicable to the current market situation, as it remains to be the tried and true method of understanding the flow of fiat within the markets.
Many analysts are currently predicting that Bitcoin is now under heavy selling pressure; however, many analysts also persistently argue for the fact that the bull market is still in tact. Instead of trying to find opportunities in Bitcoin, it is probably a great time to start finding opportunities in the altcoin markets.
As a continuation to the Bitcoin Dominance theory, this chart represents a comparative analysis (fractal) to the 2017-2018 bull run of altcoins and how they have managed to outpace Bitcoin while price action remained bearish for a brief period of time (5 weeks), while the Bitcoin dominance has witnessed a sharp drop on the percentage metric.
The above Bitcoin Dominance flow chart model is one potential predictor of where the markets could go as we are still seeing most investors and traders heavily invested into altcoins, even with Bitcoin reaching new all time highs. The model suggests that money flows from fiat into Bitcoin, down from large caps, through mid-caps to small-cap altcoins before going back into BTC and, ultimately, back to fiat. Although a few factors have changed due to the increase of new categorical coins such as NFT's and DEFI, it still remains largely the same in terms of how money flows between Bitcoin and Altcoins with the Dominance tied.
The chart I have presented above is a work in progress because it shows what happened in 2017 when Bitcoin made a correction as altcoins continued to move forward against Bitcoin. If the 2017 scenario repeats itself in any rhyming fashion, the Bitcoin dominance could continue to rise until for the time being, then fall as a potential alt season accelerates once again. If the cycle repeats, it could still launch the alt markets to stratospheric highs anytime during the year 2022, especially how some altcoins have not reached their previous ATH's (All-time highs).
Even in the 2nd quarter of last year, we can see that the drop in the dominance culminated in the run of alt coins, while BTC price didn't change that much in comparison. These following months can look a lot like that!
XForceGlobal
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@luisgguedes, You are absolutely correct. It is 100% correlated to the Bitcoin Dominance and the flow of fiat when combined with the understanding of the Dominance can give you the most upper edge when preparing for the alt season!