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Why it is a bullish sign for altcoins to rise when bitcoin falls below $ 10,000

May 9, 2020

The price of Bitcoin (BTC), the best-placed cryptocurrency by market cap, hit the $ 10,000 psychological barrier but was immediately rejected. Meanwhile, sentiment is growing out of fear of greed as the cryptocurrency index for fear and greed is back above 50 for the first time in three months.

Altcoins, however, consistently showed weakness. Investors sell their alternative currencies to take the Bitcoin train. In addition, the halving occurs less than three days after entry.

Daily performance of the crypto market. Source: Coin360

Why it is a bullish sign for altcoins to rise when bitcoin falls below $ 10,000Why it is a bullish sign for altcoins to rise when bitcoin falls below $ 10,000

Daily performance of the cryptocurrency market. Source: Coin360

Bitcoin reaches a psychological level of $ 10,000

BTC USDT 12 hour chart. Source: TradingView

BTC / USDT pair 12-hour chart. Source: TradingView

Bitcoin shows strength as the halving approaches and the hype increases day by day. FOMO (fear of missing potential profits) is also on the rise, which is why people are getting involved with Bitcoin and recovering the price sharply.

But is this recovery sustainable or will it be another case where “the rumor is bought, the news is sold”? Based on the previous halving and the previous Litecoin (LTC) halving, this is quite possible.

People are intrigued by the enthusiasm for the event as they expect bullish earnings to hit the markets in the short term and start buying Bitcoin.

Where can we see that? In general, these movements can be observed in the altcoins markets. When Bitcoin is recovering strongly, people are usually excited about Bitcoin. One of these examples is ether (ETH).

ETH BTC 1-day chart. Source: TradingView

1-day chart of the ETH / BTC pair. Source: TradingView

While Ethereum’s dollar value remains relatively stable (as the price has fluctuated between $ 197 and $ 215 in the past two weeks), the BTC pair is absolutely affected.

But why? That’s because people sell their alternative currencies to catch up on Bitcoin. Ether had a 20% sell-off in the BTC pair last week, while ChainLink (LINK) and Tezos (XTZ) had a 30% sell-off in the last ten days. In fact, all sales were recorded for the BTC pair, while the USD pairs remained relatively stable.

Interestingly, bull market movements have taken similar measures in the past. For example, the maximum price for Bitcoin in December 2017 was a maximum of USD 19,700. At that time there was a big sale of the BTC pairs of alternative currencies.

Around this time, however, alternative currencies began to recover and show strength, leading to the greatest “alternative season” the market has ever seen. Ether’s price rose to $ 1,300 to $ 1,400 the following month.

A similar structure is also being formed at this time. The sale of altcoins leads to low prices and causes investors to return to Bitcoin. That is why today, when the price of Bitcoin dropped a few hundred dollars, many alternative currencies such as Chainlink recovered.

LINK BTC 12 hour chart. Source: TradingView

12-hour chart of the LINK / BTC pair. Source: TradingView

The Chainlink price has lost 30% of its value against BTC in the past two weeks, while the value in USD has remained stable. The price declined to stay at 0.00037000 sats and then rebounded strongly. LINK’s price rose 18% to $ 4.10, a new three-month high.

However, the importance and timing of the jump are the most important concepts to consider.

The jump took place the moment Bitcoin started to withdraw. Alternative currencies are usually in vain. But this time, altcoins jumped from left to right, while Bitcoin’s price corrected itself.

Here’s another example that is the basic attention token (BAT).

BAT BTC 1-day chart. Source: TradingView

1-day chart of the BAT / BTC pair. Source: TradingView

This is one of the most powerful engines in the past two days as the price in BTC recovered by over 40%. It lost crucial support, but then leaned on the next one and recovered strongly, as the graph shows.

This currency also moved the moment Bitcoin started to withdraw. However, this is not strange since it is quite normal to expect these movements across the board. M.While some sell altcoins to hit the Bitcoin train, others sell their BTCs in that region to buy “cheap” altcoins.

The bullish scenario for Bitcoin

BTC USDT 12 hour chart. Source: TradingView

BTC / USDT pair 12-hour chart. Source: TradingView

The bullish scenario is pretty simple. The level between $ 9,250 and $ 9,400 must be maintained for the current rally to continue.

The next step would be to break out of the strong resistance zone between $ 10,050 and $ 10,350. Breaking this level and turning it into support would be a good sign for the bulls. The next targets are USD 10,800 and possibly USD 11,600 to 12,000, a level with an open CME gap (as of August 2019).

The bearish scenario for Bitcoin

BTC USDT 12 hour chart. Source: TradingView

BTC / USDT pair 12-hour chart. Source: TradingView

The bearish scenario shows a clear structure. Assuming the overkill fails after bitcoin is halved next week, a withdrawal and correction may be inevitable.

However, it is questionable whether this will happen with a lower peak or another peak in the range of $ 10,050 to $ 10,350. An explosion in the resistance area could still occur to confirm declining divergence and a possible trend reversal.

This dropdown and pullback should bounce back altcoins to recover as they want to follow Bitcoin. So a break below $ 9,400 could be a signal for them to recover.

The loss of the $ 9,400 level would be a bearish signal for Bitcoin’s momentum, but possibly a bullish signal for alternative currencies to catch up.

The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every investment and trade movement involves risks. You have to do your own research when making a decision.

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