Altcoins collapsed on February 14 after the price of Bitcoin (BTC) hit a new all-time high above $ 49,000.
The timing of the altcoin market crash was noteworthy as it happened when BTC was rising, which normally doesn’t happen.
Why exactly did Altcoins crash?
There are two main reasons why the altcoin market has declined despite the strength of the market leading cryptocurrency.
First, when the price of Bitcoin rose to a new high, it absorbed most of the volume in the cryptocurrency market. This, of course, resulted in the market leaning mostly towards BTC, which contributed to the retreat of altcoins.
Second, Ether (ETH), which typically leads the dynamics of the altcoin market, fell sharply against Bitcoin.
The combination of these two factors coupled with the uncertainty surrounding Bitcoin at a resistance level of $ 50,000 increased selling pressure in the altcoin market.
A pseudonymous trader named “Kaleo” pointed out that predicting the Bitcoin rally to $ 50,000 might be straightforward.
However, whether BTC breaks above $ 50,000 is still a major question that would determine the direction of the short-term price cycle of the cryptocurrency market. He He said::
“So this move to just under $ 50,000 was incredibly easy to spot. The real question is what will happen now. I’m prone to a brief consolidation and range breakout, but I’m undecided. How long it will take? Is it rejected? I dont know”.
If Bitcoin first consolidates before breaking above $ 50,000 in theory, that trend would likely benefit Altcoins in the near future.
During a Bitcoin uptrend, altcoins tend to rise when BTC enters a consolidation phase after an initial rally. However, when BTC goes up or takes a small drop, altcoins often see sharp drops in price against BTC and the US dollar.
Bitcoin is maintaining an upward trend for the time being, which is benefiting Altcoins
Currently, Bitcoin is maintaining its bull market structure, which would ease the selling pressure in the altcoin market somewhat for the foreseeable future.
Scott Melker, a cryptocurrency trader and analyst, said Bitcoin continues to post bullish flags one by one.
Bullish flags are a market structure in technical analysis that materializes when the asset marks a breakout after consolidating within a range.
This typically shows a ladder rally that is sustainable in the long run. milker He said::
“Bullish flags everywhere. After 7 rejections, it finally closed above $ 48,200. Consolidation below resistance generally leads to a breakout. “
As long as Bitcoin respects the newly established support area of $ 48,200 and consolidates between $ 48,200 and $ 49,700, another outbreak is very likely.
If Bitcoin breaks out again this time, the altcoin market should rebound along with Bitcoin after BTC’s initial momentum rally initially declined.