Altcoin Market Cap (in BTC): Top-Down Analysis
It has been a while since my last post, and, whilst I anticipated further decline in ALT/BTC prices at that time, we certainly did overshoot the estimation, with altcoins failing to find support at the historical trendline resistance turned support (see the Weekly chart). This was originally where I expect alts to find their cyclical bottom, though I had disregarded a number of things. Before we get into the details, however, I’d like to preface this by saying that, accounting for liquidity, this is currently the most depressed altcoins have ever been since the first one was created…
Now, let’s begin our analysis by taking a look at the Weekly chart:
Here, we can see the prominent parabolic decline that began when the market topped out in January 2018, with each decline steepening dramatically as we moved into 2019. We are currently experiencing the steepest downtrend since 2015, with current estimations rendering the altcoin market virtually extinct by year-end at the current rate of decline.
One thing I have noticed recently is just how eerily similar this bear market for altcoins has been to that of November 2014 – December 2015: back then, the market topped out and appeared to have bottomed early in 2015, as altcoins rallied and Bitcoin lost dominance for a number of weeks; this, however, proved to be a fakeout, with prices crashing almost symmetrically to the first decline (a near-perfect bear flag, for those that are familiar with classical patterns). Following this, altcoins found their cyclical bottom and rallied to new highs in 2016.
Now, take a look at what has occurred since January 2018: the altcoin market topped out, put in a complacency shoulder and dropped off, finding an interim bottom (that many of us, myself included, initially expected to be a cyclical bottom) at the area of demand that preceded the December-January bull cycle. Prices began to rise and Bitcoin began to lose dominance for several weeks, although the rising valuation of the altcoin market was very much slow and steady; unlike historical reversals. This should have been the first sign that this was re-distribution rather than a cyclical reversal, and in April the altcoin market broke down and hasn’t looked back since, falling almost symmetrically to the original leg down from all-time highs.
It does appear that the same bear cycle fractal is playing out, albeit on a protracted scale, which, in hindsight, I should have expected given the extremity of the bull cycle beginning in 2017. Further, if we look at the Weekly chart, it appears as though the earlier cycles preceding 2017 were a kind of normal, from which the altcoin market broke out to unforeseen euphoric heights and has now returned to that normal. Returns to normal are common in market cycles prior to new cyclical bottoms being found. Looking at this, it seems as though perhaps we have a little more blood left to be let before we see re-accumulation and a sharp reversal occur.
Lastly, before I move onto lower timeframes, I must also point out that Weekly RSI is at all-time lows at present.
Now, looking at the 3-Day, I have here highlighted the various occasions on which 3-Day RSI has hit 30 in the past. It appears that there have been two fakeouts, with every other occasion preceding a cyclical bottom; the first was in 2015 and the second in August 2018.
Further, this is now the second-deepest bear market for altcoins in history, only 1.4% away from the being the deepest; however, accounting for the lack of liquidity pre-2017, this is undoubtedly the most depressed the altcoins market has ever been. Moreover, this is by far the most protracted bear market in history, with it being 587 days since the last cyclical high.
As such, I am expecting the market to make a bottom within 15% of the current valuation, occurring before Q4 2019. Following this, I expect we shall see a period of re accumulation and a sharp reversal, with Bitcoin losing dominance for several weeks.
Now, looking at the first Daily chart provided, we can see that a bullish divergence has formed here, but that the altcoin market remains capped beneath trendline resistance from June. Until this trendline resistance is broken above and the market can reclaim prior support at 8.9mn BTC, I expect we shall see lower prices.
And finally, looking at the second Daily chart, we can see how textbook recent bearish movements have been, with the altcoin market losing support and turning it into new resistance all the way down since June.
The valuation of the market was ~14mn BTC in December 2018, preceding the fakeout rally to 17.5mn BTC. This led to the breakdown below December lows, and new lows have continued to be made, with no prior supports being reclaims as of yet; as such, if the market is able to reclaim 8.92mn BTC as a valuation, I expect the cyclical bottom for altcoins to be in. Until then, altcoins remain in a steep downtrend, capped by 2-month trendline resistance.