Ether (ETH), the native cryptocurrency on the Ethereum blockchain, has lagged behind Bitcoin (BTC). Historically, as BTC rises, altcoins tend to rebound with higher price movements.
This time, Bitcoin significantly outperformed the altcoin market, especially in December. BTC’s market cap dominance has recently soared to a year-long high of around 70%, largely due to the huge sell-off of XRP last week.
The difference in bitcoin pricing
The difference between the current Bitcoin price movement and the previous bull cycles in 2018 and 2019 is that BTC entered pricing.
Simply put, pricing is when the price of an asset rises above previous highs and continues to break new ground. Altcoins generally stagnate when Bitcoin enters pricing as BTC absorbs the volume of the altcoin market.
In addition, when Bitcoin is rising rapidly, it is prone to large short-term withdrawals. The problem with altcoins is that when BTC rises, they lag behind BTC and when BTC falls, altcoins often see even bigger corrections.
For the foreseeable future, it will be crucial for the altcoin market that ether gains momentum versus Bitcoin. This would likely start the next altcoin season, if one shows up soon.
Currently, ether is still worse than bitcoin. The ETH / BTC pair is still showing no signs of a breakout for most of the high time periods including the daily chart.
As such, the ideal scenario for the altcoin market is for the ETH / BTC pair to hit bottom and then break out for the altcoins to regain momentum.
Michael van de Poppe, an analyst at Cointelegraph Markets, noted that traders are currently fearful of buying altcoins due to market dynamics. In his latest technical analysis of ETH, he also emphasized that the ETH / BTC pair is still showing weakness.
He added that Ether’s weekly chart is showing a clear breakdown under the support of the BTC pair, suggesting that further weakness for altcoins is likely.. Poppe pointed out that the ETH / BTC pair would have to rise above 0.026 BTC to regain upward momentum.
“As long as ETH stays above 0.021 sats, bullish arguments can be made for another advantage as the bullish construction would still be intact,” he explained, adding:
Ideally for ETH, a rally of 0.026 sats would indicate strength and further continuation, so traders should watch this level first. If this is not the case, the next area to watch is the 0.021 Sats zone along with the $ 450 region.
When could altcoins become attractive?
In fact, there is a strong argument that the so-called “alternate season” may not even appear in the first quarter of 2021.
Bitcoin is now 25% above its 2017 high and Ether is still 50% below its 2017 ATH. Https://t.co/IIuU9KEEs0
– Ansel Lindner (@AnselLindner) December 25, 2020
Some analysts say Bitcoin’s profits will not return to the altcoin market this time around as Bitcoin sees a rally led by institutional investors.
However, some traders expect altcoins to become more attractive with Bitcoin rallies. A pseudonymous trader named “Salsa Tekila” stated that capital could return to altcoins if Bitcoin continues to rise, considering altcoins did historically well in the first quarter after BTC peaked in December. He wrote:
“The higher the BTC value, the more attractive the altcoins become. The market capitalization of BTC is currently 6.5 times the market capitalization of ETH. The USD sales factor is plausible, especially in 2021 with the popularization of the $ ETH stake. The maximum probability would be to catch altcoins as nuclear weapons during a major Bitcoin finale. “