With the upcoming election outcome and expected adjustments in monetary policies, Bitcoin [BTC] is navigating through a period of volatility that is attracting traders seeking its perceived stability. Amid market uncertainties, the traditional trading strategy of flocking to Bitcoin has propelled BTC close to its historical peak of $73K, pushing its dominance in the market past 60%.
With Bitcoin commanding the spotlight, could this increased dominance pave the way for a surge in altcoin investments, signaling a potential altcoin season?
Potential Altcoin Season Triggered by Post-election Cycle
Historically, leading up to Bitcoin’s previous peak of approximately $73K in March, altcoins experienced significant upswings as individual investors diversified their investment portfolios, driven by optimism and FOMO. However, the current market landscape appears to be distinct.
A recent CryptoCrypto report has indicated that sudden spikes in short liquidations have played a significant role in fueling the recent price hikes in Bitcoin.
While this points towards a short-term positive outlook, it might also instill a sense of caution among investors wary of potential market volatility stemming from derivative trading.
This response mirrors a fundamental psychological reaction to uncertainty. If this pattern perseveres, investors might redistribute their funds towards other prominent tokens, potentially laying the groundwork for an altcoin season.
Given that all Bitcoin cohorts are currently in profitable territories, there is a strong possibility that altcoins could witness a surge by the middle of November.
This timeframe could align with the conclusion of the electoral cycle, prompting investors to readjust their tactics in alignment with emerging market trends.
In essence, as profit-taking unfolds and market sentiment shifts, altcoins could garner increased capital influx, sparking the onset of an altcoin season.
A Potential Hurdle to Overcome
Despite the prevailing optimism, evidenced by Ethereum’s notable weekly upturn following a period of underperformance against its major counterparts in the previous cycle, its resurgence could signify a return to earlier market patterns.
However, the broader altcoin market is facing challenges. While a handful of tokens could witness breakthroughs, the overarching trend indicates that altcoins, as an asset category, are struggling to showcase strength.
As the total market capitalization has surged from $2 trillion to $2.4 trillion, the majority of fresh investment has poured into Bitcoin, draining liquidity away from altcoins, as indicated by the rising dominance of Bitcoin.
This trend hints at a growing disconnect between Bitcoin and the rest of the market. Presently, only 14 altcoins have succeeded in attracting liquidity in the past three months.
Furthermore, they have been trapped in a relentless downtrend against Bitcoin since the beginning of 2022, with altcoins underperforming for nearly four years, marking levels not witnessed since February 2021.
In conclusion, it is evident that the liquidity dynamics within the cryptocurrency realm have undergone significant shifts. While select altcoins may stand to gain momentum during the post-election cycle as Bitcoin investors look to redistribute their profits, the narrative surrounding an approaching altcoin season remains uncertain.
This pattern indicates that a high Bitcoin dominance might no longer be a reliable indicator for an impending altcoin season.