Is Alt Season Set to End? Signs Point to Market Reversal

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  • Alt season could be set for a swift end if Bitcoin’s weakness is anything to go by
  • Traditional markets are also looking poor, suggesting a bigger correction is on the cards
  • The Coronavirus pandemic continues to worsen in the US, spooking investors

Alt season has seen many cryptocurrency traders finally making some big bucks in the past few weeks, but there are signs that it could be coming to an end and an entire market reversal could be in the wings. We analyze the crypto markets and the wider economic situation to see why we might be about to wave goodbye not just to alt season but to four months of economic rebound worldwide.

Alt Season Undermined by Reliance on Bitcoin

The first sign that alt season could be about to disappear before our eyes is the total crypto market cap, the importance of which we discussed in a post yesterday. The total market cap has once again been unable to clear the resistance line set in January 2018, reinforcing the idea that, following the rebound from March, there isn’t the desire to push past this line and continue the uptrend:

Crypto Total Market Cap 1

As we said yesterday, this means that those sitting on the sidelines are not yet ready to put their money into the crypto market, which is not a good sign – they are either uncertain about the market’s strength or they are sure that lower entry points are coming, so they are holding back.

This sentiment is echoed in Bitcoin’s current performance, with lower highs constantly being put in since early June:

Bitcoin Price 2

Clearly, Bitcoin too lacks the strength to really kick through its downtrend. On a lower time frame we are approaching a critical point, with Bitcoin needing to hold the recently-created support in order to avoid a collapse:

Bitcoin Price 3

It doesn’t look great for Bitcoin, and therefore the entire crypto market, and the reason for this uncertainty may be found in the broader markets and the impact of coronavirus.

Market Recovery Hits the Buffers

The bounce back from the market-wide crash in March has been spectacular, with the Nasdaq today hitting all-time highs to cap a 77% jump in just four months while Tesla and Amazon also hit new highs, but warning signs lurk amid this euphoria.

The S&P 500, to which Bitcoin has been eerily correlated of late, failed to top June’s recovery high yesterday, resulting in a dramatic rejection:


This comprehensive rejection looks like it could mark the top of the recovery, which has been flattening out since June, offering up a classic double top pattern. Similarly, the Dow Jones Industrial Average seems to be about to put in a lower high after its recovery bounce, suggesting that it, too, is topped out:


This usually results in a price drop, unless the fundamentals of the asset in question can offer hope of a swift recovery.

Worsening Coronavirus Crisis Could Tank Markets

Looking at the fundamentals of the asset discussed here, which is the American economy, it is clear that hope is the one thing we don’t have at the moment – coronavirus cases are at record highs in many states, hospitals are reporting full capacity, and small businesses are closing by the thousand.

The negativity around the American economy can be summed up by Goldman Sachs advising investors to short 10-year treasury bonds, which have been in a quite spectacular decline ever since they were introduced in 1981 and fell off a cliff in 2019:

Yields 6

The prospect of negative yields is very possible, all of which points to an economy that could be on the verge of collapse.

With all indicators showing that the initial v-shaped recovery phase could be over and the Trump administration determined to reopen the country despite the coronavirus pandemic continuing to worsen, it’s fair to say that alt season could be the furthest thing from our minds in the weeks and months ahead.