- Bitcoin dominance got rejected at a key level, allowing alts a little recovery
- It has returned to the middle of the five-week channel with no indication of next direction
- Alts will get a further boost if Bitcoin dominance repeats prior activity
The altcoin market has gotten something of a reprieve over the past few days as the Bitcoin dominance level that was threatening to break out instead fell back into its five-week channel, although the victory may be short lived. Bitcoin itself continues to hover just underneath the $11,000 barrier while the dominance level could still rise significantly from here.
Bitcoin Dominance Rejected at Key Level
As we reported Wednesday, Bitcoin dominance appeared to be operating inside a channel after suffering a downtrend since May, which led to the recent alt season. This channel started in the first week of August and had already seen one rejection at the high, but there were concerns among altcoin holders that at the second time of asking Bitcoin dominance might break through and start a new run for Bitcoin.
This didn’t come to pass however, as Bitcoin dominance rejected at 61.5% before dropping back down again:
This leaves us firmly within the channel and no clear direction of a next move:
Technically speaking, Bitcoin dominance now has the opportunity to put in a higher high, but we saw last time it failed to break out that it held at this level for a while before collapsing down to the channel bottom. Were it to do so again then alts would see another bounce, and a greater one should the bottom level not hold for a third time and we drop down to the 50s.
Bitcoin Shows Signs of Strength
Bitcoin has unsurprisingly seen a price increase while the dominance has been going up, banishing fears of a collapse to $9,000 (temporarily at least) and rising to $11,000 before being rejected. Its response has been encouraging however, finding support at $10,740 before heading up again.
It may well turn out that the Bitcoin price ranges alongside the dominance level until it breaks up or down for good. Either of these would have an immediate negative impact on altcoins, but this should only be short lived as there is plenty of life in the altcoin market yet.
On a weekly timeframe we can see that Bitcoin has still stayed above the critical trendline that was broken back in July which signalled that a new market cycle had begun, despite Bitcoin dominance crashing:
So far Bitcoin’s reaction to dropping down toward the trendline seems to be nothing more than a result of being overextended on the initial run up, and the recovery from the $2,000 drop is encouraging. Even setting a lower high here would not be concerning, as long as we don’t close below the long term trendline – for there be dragons (and bears).