Since reaching a several month high of around 45.5% at the end of March, the Bitcoin dominance figure has fallen sharply to a recent low of 37.1% as of today. It would appear the alt-cycle is once again in full swing, as the majority of top 20 alt coins have surged anywhere between 20% and 95% in the past 7 days. However, the decline in Bitcoin dominance and beginning of the alt cycle phase has come a lot sooner than many predicted.
What is Different about this Bitcoin/Alt-Cycle Reversal?
At the beginning of March, we published an article during the Bitcoin phase of the cycle predicting dominance to rise to 50-60%. This seemed like a reasonable estimate at the time based off projections that the Bitcoin dominance peak has been falling with each new cycle.
Additionally, the past two Bitcoin cycles lasted roughly 6 months before the alts began to rally. To contrast, the Bitcoin phase we have just emerged from lasted just 2 and a half months! But what might this tell us about future cycles?
Firstly, as the Bitcoin dominance figure peaked a lot lower than expected at just 45.5%, we might also expect it to reach record lows during this alt cycle. Given it bottomed out around 32.5% last time, 25% or lower does not seem out of the question. Secondly, we are also expecting this phase to be shorter.
Profiting from Market Cycles through Portfolio Adjustment
The cyclical nature of markets is nothing new and occurs across many different asset classes. In order to profit from these events, it is important to both be able to identify them and react accordingly through portfolio adjustments. Now this doesn’t mean selling all your Bitcoin for fiat when dominance is falling, but rather moving a percentage of your Bitcoin into alts.
When the alts are high, Bitcoin essentially becomes ‘cheaper’ relative to alt-coins. So when alts growth has plateaued relative to Bitcoin and the cycle looks to be coming to an end, you should contemplate adjusting your portfolio to contain a higher proportion of Bitcoin.
Now when the Bitcoin phase kick starts again, Bitcoin will be outperforming the market and your portfolio will be setup to benefit from this. Similarly, when Bitcoin growth peaks, alts will be relatively ‘cheap’ and it is time to adjust again in time for the alt phase to begin. Consider the diagram below as an example of potential portfolio proportions and how they might adjust during cycles.
It is important to remember that Bitcoin’s price may also be increasing, but relative to alt coins the growth is inferior. Consider the past week as an example. Bitcoin was up roughly 15%, whilst Ethereum, Ripple & Dash posted 30% gains and EOS & Bitcoin Cash were up 70%. Thus, you could make significantly more gains by adjusting your crypto portfolio to be more alt-heavy during this period.
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