Alt Season May Be On Ice, As Demand Appears Overcome By Supply!
Alt season. It's like an elusive mythical legend, only known through campfire crypto tales and the fables of old. In this update analysis, we're going to take another look at the development of the total crypto market cap excluding BTC, to understand how the next alt season is developing, if it's developing at all.
Looking at this weekly chart, you can see that the market cap remains below the 50 and 200 week moving averages (orange and purple respectively.) What's interesting, is that this week's candle shows a strong breakdown below the 200 week moving average (in purple.) However, it's currently testing the bottom of the Gaussian Channel for support.
If we compare the current setup to the market cap before the 2016-2018 alt season, we can see that there are some similarities in the way price and the indicators are behaving. Specifically, if you look at 2015, we can see that the Gaussian Channel flipped from green to red. At that point, price was defining the bottom of the Gaussian Channel as overhead resistance (1.) Then, we can see that price broke down below the Gaussian Channel (2.) From there, price recovered back into the channel, finding resistance at the midline of it (3.) Then, price fell back down to the bottom of the Gaussian Channel (4) and held it for support. Subsequently, price was able to break out above the Gaussian Channel (5) and that was an indication that alt season had begun.
When we compare that to the current price movement, and the way the market cap is interacting with the Gaussian Channel, we can clearly see that it's almost identical. However, that doesn't mean that we're guaranteed to see a massive alt season like before. This chart needs to develop more, and we need to see more data. For example, we need to see the market cap rally above the aforementioned moving averages, and particularly the top of the Gaussian Channel. We also need to see the Gaussian Channel flip to green again. That, in conjunction with other indicators like the weekly RSI trading into overbought territory, will be massive indicators that the next alt season has begun.
However, I wouldn't get too excited just yet. BTC looks extremely weak right now, and (personally) I think there is a lot of danger in the market right now. In other words, if BTC continues to fall, it could easily drag the alts down lower, which would cause them to break down below the Gaussian Channel, which would be a deviation from what was seen prior to the last alt season. That hasn't technically happened yet, but I do think it is a risk worth acknowledging.
Looking at the RSI, you can see that it's already dipping below the low that was printed on the trough labeled with the 4 in 2015. It isn't much, but what's interesting, is that when the market cap tends to get below that area (red trendline) things start to get pretty nasty. For now, we need to keep our eye on this to see how it plays out. If alts start to drop below the Gaussian Channel, I think we could see some pretty nasty selling out there. On the other hand, if we confirm above it, alts could be entering a very similar bull cycle to what we saw from 2016-2018.
However, there is one glaring indication that makes me think we have a problem here, and it's the VOLUME! You can see that the volume in alts has been rising since the high in early 2018, while the overall market cap has been on a substantial decline. That is a sign that demand is overcome by supply, and it usually precedes further declines. Typically, this indicator should include a look at open interest. However, I can't find an open interest indicator for the total market cap of crypto excluding BTC. Either way, it's generally not a good sign to see volume rising like that while price is falling. It shows major weakness that didn't exist before the last alt season. Regardless, I will be keeping my eye on this chart, so that I can act quickly when the time is right.
I'm The Master of The Charts, The Professor, The Legend, The King, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Looking at this weekly chart, you can see that the market cap remains below the 50 and 200 week moving averages (orange and purple respectively.) What's interesting, is that this week's candle shows a strong breakdown below the 200 week moving average (in purple.) However, it's currently testing the bottom of the Gaussian Channel for support.
If we compare the current setup to the market cap before the 2016-2018 alt season, we can see that there are some similarities in the way price and the indicators are behaving. Specifically, if you look at 2015, we can see that the Gaussian Channel flipped from green to red. At that point, price was defining the bottom of the Gaussian Channel as overhead resistance (1.) Then, we can see that price broke down below the Gaussian Channel (2.) From there, price recovered back into the channel, finding resistance at the midline of it (3.) Then, price fell back down to the bottom of the Gaussian Channel (4) and held it for support. Subsequently, price was able to break out above the Gaussian Channel (5) and that was an indication that alt season had begun.
When we compare that to the current price movement, and the way the market cap is interacting with the Gaussian Channel, we can clearly see that it's almost identical. However, that doesn't mean that we're guaranteed to see a massive alt season like before. This chart needs to develop more, and we need to see more data. For example, we need to see the market cap rally above the aforementioned moving averages, and particularly the top of the Gaussian Channel. We also need to see the Gaussian Channel flip to green again. That, in conjunction with other indicators like the weekly RSI trading into overbought territory, will be massive indicators that the next alt season has begun.
However, I wouldn't get too excited just yet. BTC looks extremely weak right now, and (personally) I think there is a lot of danger in the market right now. In other words, if BTC continues to fall, it could easily drag the alts down lower, which would cause them to break down below the Gaussian Channel, which would be a deviation from what was seen prior to the last alt season. That hasn't technically happened yet, but I do think it is a risk worth acknowledging.
Looking at the RSI, you can see that it's already dipping below the low that was printed on the trough labeled with the 4 in 2015. It isn't much, but what's interesting, is that when the market cap tends to get below that area (red trendline) things start to get pretty nasty. For now, we need to keep our eye on this to see how it plays out. If alts start to drop below the Gaussian Channel, I think we could see some pretty nasty selling out there. On the other hand, if we confirm above it, alts could be entering a very similar bull cycle to what we saw from 2016-2018.
However, there is one glaring indication that makes me think we have a problem here, and it's the VOLUME! You can see that the volume in alts has been rising since the high in early 2018, while the overall market cap has been on a substantial decline. That is a sign that demand is overcome by supply, and it usually precedes further declines. Typically, this indicator should include a look at open interest. However, I can't find an open interest indicator for the total market cap of crypto excluding BTC. Either way, it's generally not a good sign to see volume rising like that while price is falling. It shows major weakness that didn't exist before the last alt season. Regardless, I will be keeping my eye on this chart, so that I can act quickly when the time is right.
I'm The Master of The Charts, The Professor, The Legend, The King, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-