The highly awaited altcoin season might be postponed until there is a significant change in the price of Ethereum [ETH] in relation to Bitcoin [BTC]. Many experts believe that Bitcoin’s dominance plays a pivotal role in determining the strength of altcoin surges. As Bitcoin’s dominance continues to increase, the prospects for altcoins appear uncertain.
While patterns from the past suggest that altcoin seasons often follow periods of high dominance, the persistent downward trend of ETH/BTC leaves traders wondering when, or if, the situation will reverse in this cycle.
Altcoin Season Relies on the Reversal of ETH/BTC
The ongoing underperformance of Ethereum against Bitcoin poses a challenge to the possibility of a widespread altcoin rally. As noted by market analyst Benjamin Cowen, the weak capital rotation into altcoins is expected to continue until ETH/BTC stabilizes and begins to rise.
The most recent monthly chart for ETH/BTC displayed a significant drop, breaching crucial historical support levels. Currently trading at 0.0279, ETH/BTC has seen a 13.28% decline this month, further extending its downward trend that commenced in late 2021.
The data clearly shows a prolonged downward trend, similar to previous bearish cycles where Ethereum struggled against Bitcoin’s dominance.
In the past, robust recoveries in ETH/BTC have preceded notable altcoin surges. Yet, with Ethereum’s weakening position against Bitcoin, altcoins are facing considerable obstacles. Unless ETH/BTC stabilizes and reverses, Bitcoin is expected to maintain its dominance in the market.
Bitcoin Dominance and Its Influence on Altcoins
Bitcoin dominance [BTC.D] has been steadily increasing, reaching 60.65% and strengthening its grip on the cryptocurrency market.
This trend reflects investors’ preference for Bitcoin over riskier assets, as evidenced by Ethereum’s prolonged weakness.
As emphasized by Cowen, a common misconception is that a rising BTC.D is inherently detrimental to the crypto market.
However, historical cycles indicate that major altcoin rallies often originate from periods of heightened BTC dominance rather than the opposite. It is important to note that a significant shift in capital distribution is unlikely until ETH/BTC shows signs of reversal.
Historical Delays in Altcoin Seasons and What Lies Ahead
In the last three years, anticipated altcoin seasons have failed to materialize due to the continuous decline of ETH/BTC. According to Cowen, post-halving years typically witness a decline in Bitcoin’s dominance, offering potential for altcoins to shine later in the cycle.
For now, Bitcoin’s market dynamics remain the primary determining factor, and a definitive shift towards altcoins is improbable without a recovery in ETH/BTC.
Although a reversal could potentially occur later in the year, traders are advised to exercise caution regarding premature optimism. Until Ethereum demonstrates strength against Bitcoin, the altcoin season will likely be a game of patience.