Crypto Market Update - Analysing market cycles

BTC

During last week, BTC had a nice run and even surpassed the first level without any problem.

That tends to be a sign of bullishness but after that, it needs to cool down a bit to probably continue the trend if there is not any Black Swan event around.

In case of retracement, we will have 3 different supports:

1. The previous orange box is an inner important level.
2. The new Blue Box, which is the drop level of the intraday ascending channel.
3. The main Golden Pocket, which is the yellow box.

Dropping to any of those levels won’t be bearish but a normal movement, but going under the Main purple box would be a bearish sign.

We don’t see reasons for that to happen at least for the moment, but we know that anything can happen on the markets, so we have to be prepared for any scenario.

BTC Dominance and Altcoin seasons

Today, we will focus on explaining how market cycles work inside the world of crypto, relating BTC, Dominance, and ETH.

It is very well-known that money inflow in crypto moves in waves, from BTC to Altcoins and vice versa. First, let’s compare ETHBTC (lower chart) chart vs BTC Dominance (upper chart) in a very general view, and see what are the seasons: 

As we can see, for every Dominance drop, we have an ETHBTC pump. That is due to the factor that money is passing from BTC to Altcoins.

Usually, BTC pumps the first, so traders and investors can make money from BTC bull run and once BTC arrives at some resistance levels, it tends to fall a bit or consolidate to bring momentum to altcoins.

Then, the real altcoin season begins until BTC decides to break down and at that moment, money returns to FIAT or BTC to repeat the same cycle again and again.

Another key factor is the timing of each cycle. If we compare the past, we can see very important months when the seasons are created.

For example, in the chart below, we can see that at the end of the year, it tends to be the best moment to enter altcoins as we can expect at least some weeks of altcoin season. 

If we look at other seasonal cycles, we will see that most of the cycles repeat in the same months year over year.

That’s why it is key to understand market cycles in order to maximize investments. There are few times in the market when that decorrelation does not work, which are the very bullish momentum or the very bearish momentum.

At that moment, we can see a correlation between both but in most of the cases, we see that decorrelation constantly.