Ever since alt-coins first appeared on the cryptocurrency scene, people have predicted that the new technology and varied use cases on offer would make Bitcoin obsolete in the long run. As hype around alt-coins grows and their price rises, the Bitcoin dominance figure falls, which leads to more hype and Bitcoin dominance decreases further. However, once hype is exhausted and prices level out, something triggers a correction and the whole market plummets.
Bitcoin dominance oscillating over time. Source: CoinMarketCap.
The depression may last weeks, months or even years, but eventually the hype train starts up its engines once again. Bitcoin re-enters the news for whatever reason – a hard fork, new technology, business adoption – and the price starts to rise once again. Shortly after, the bluechip alts follow, then the lesser known alts, and the cycle begins anew.
This is known in the crypto world as the bitcoin-alt cycle and it has been happening ever since alternatives to Bitcoin were created. But the cyclical nature of crypto markets is nothing new, market cycles are well documented within traditional stocks and asset classes. The key to profiting from these events is learning to spot them and adjusting your portfolio accordingly. So what does past data tell us about what to expect in the coming weeks and months?
Is the Bitcoin-Alt Cycle Reversing Once Again?
The most notable ‘flippening’ event started roughly a year ago in March, where hype around mainly Ethereum and Ripple brought the Bitcoin dominance figure down substantially. Historically, it was rare for dominance to fall below 80%, but by June it had fallen to a record low at the time of around 37%. The flippening was here, Bitcoin was dead, all hail the new king.
Source: CoinMarketCap
But hype can only last for so long before it becomes exhausted. Social media and news outlets began to quieten down, Ethereum ran into scaling issues, new inflows of fiat dried up and a major correction occurred, with Ethereum falling over 50% from its all time high. Then the Bitcoin hype train started all over again, in part due to the Bitcoin Cash hard fork, and the Bitcoin dominance figure spiked back up to 65% by early December.
The alts then followed suit and in one short month Bitcoin dominance fell to an all time low of 33%. Next, the massive January 2018 correction occurred, which leads us roughly up to now. So what is likely to happen next? What kind of prices can we expect for Bitcoin?
Over the past 3 weeks, Bitcoin dominance has been steadily rising to a two month high of 41.5% as of today. In part driven by greater SegWit adoption, a big fall in transaction fees and some political endorsement. If the cycle is indeed reversing, we can expect to see this figure rise to at least 50% – 60%. Based on todays price and market caps, this would result in a rise in the price of Bitcoin to roughly $13,750 – $16,500. However, technical analysis suggests that a rally upward of $17,000 is possible.
