When to buy altcoin? Just look at BTC dominance chart.
BTC.DAs usual, after a pump of BTC it gets stronger and everyone wants to buy it. The demand leads to a sell off on altcoin market, resulting in a 3 to 5 times decreasing rate of most altcoins in comparision to the increasing rate of BTC. After BTC is cooled off, capital will flow to altcoins because of their attractive profit, causing altcoin blooming season. But, the recently bull run of BTC on april 2019 has not made any altcoin seasons as expected, actually altcoins and even top coins (coins with high market capitalization such as ETH, XRP, LTC) have been bleeded too much this week. So, you might ask "when is the right time to buy altcoin?". By using just one chart, the BTC dominance (BTC.D) chart, you can answer your question.
BTC dominance is an index that was calculated by deviding BTC cap. to whole crypto market cap., characterizing the impact of btc on the entire crypto market. One believes that 50% is a key value of this index, if btc dominance is over 50%, there will be hard time for altcoins and vice versa. The more high BTC dominance the more bleeding of altcoins. For better illustration to the influence of BTC dominance to altcoin prices, I have attached 2 charts to BTC.D chart, which are ENJBTC (low market cap., an altcoin) and EOSBTC (high market cap., a top coin). They were picked randomly, definitely every coins will fit this rule.
Now look at the chart, we can see that both coins go against the BTC dominance. Specifically, from 6 dec. 2017 to 15 jan. 2018, BTC dominance dropped from 69.69% to 35.72%, both coins exploded. We have first alt season on 2018, lots of altcoin pumped on this season. From 29 mar. to 7 may 2018, BTC dominance had another drop from 49.75% to 38.76%, both coins had another pump. We have second (and last) alt season on 2018. Most of the coins had reached their top high on this season, before lost tens times of value by the end of the year. From 24 jul. to 5 aug. 2018, BTC dominance was trying to break out 50% key value, after the break out alt market has felt into crisis period till now.
By interpreting BTC.D chart, one can pridict the right time (in term of macro view) to buy or not buy altcoins and even top coins, namely:
- Ideally, BTC dominace values below 50% are good sign to buy altcoin. We will get better profit when BTC is weaker than the others.
- In a rising trend of BTC dominance (this time - apr. 2019), it is very bad time for entering altcoins and top coins.
- If BTC dominance values are above 50% but there is a downtrend of BTC dominance, we can enter scalp trading for altcoin and top coins.
- When BTC dominance keeps going sideway, top coins will have the same behavior of BTC (in USDT pair), it is better to trade top coins, not altcoins.
Fortunately (thank to tradingview team), we can apply indicators on BTC.D chart, that helps us to predict future movement of altcoin market, and plans strategies for next scenarios. I shall make an analysis on BTC.D next post.
Please share your thought, thanks for reading!
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