Key Points
- Bitcoin dominance rises while altcoin markets suffer, with $2.18 billion worth of liquidations in the past 24 hours.
- Stablecoin Exchange Reserves show potential for rebound despite the biggest-ever liquidation event.
Bitcoin’s dominance is on the rise, which is not favourable news for the altcoin markets. In the last 24 hours, the crypto market has witnessed liquidations worth $2.18 billion, marking the largest liquidation event ever. Bitcoin [BTC] accounted for $409 million of these liquidations, but the altcoin market has been hit much harder.
This is evident from the price action and the swift increase in Bitcoin Dominance (BTC.D) in recent hours. The latter is an indicator of relative BTC strength, or altcoin weakness. The BTC.D has not exceeded the 60% resistance zone, which is not a positive sign for altcoins. However, metrics for stablecoins suggest there might be some hope.
Bitcoin’s Position and Stablecoin Metrics
Despite the panic, it’s important to note that Bitcoin has not yet lost the lows of the 2-month range lows at $92k. An examination of the Tether [USDT] metrics reveals whether buyers have any strength. The USDT Exchange Reserves have been growing over the past two years. More stablecoins in Exchange Reserves indicate greater buying power in the market. However, it might take some time for the bulls to step in after the extreme liquidation event in recent hours.
The Exchange Reserves show some promise. The USDT netflows have been positive in recent weeks, especially in November. The transfer of stablecoins to exchanges is another sign of buying, although it has slowed down since December.
Bitcoin Dominance Trend
The rejections from the 60% resistance zone on the BTC.D chart took place in 2018 and 2019, during the bear years following the 2017 bull run. The current retest happens in a bull run year, assuming it’s not over yet, and none of the conventional BTC bull peak indicators have flashed positive yet. From a technical perspective, BTC.D is likely to move higher to 63.84% and 72.5%. This could be good news for BTC but bad for the altcoin market.
This could be due to steady ETF and institutional demand for Bitcoin, while altcoins get overlooked. Later in the cycle, closer to the peak, an altcoin season could materialize. It would be characterized by a sharp BTC.D drop and significant gains across the rest of the market as capital rotates from BTC to the alts. However, an altseason might not materialize at all. There are too many altcoins for them all to increase – this could see some blue chip coins and tokens with unique value be the biggest winners. Only time will tell, but investors must be prepared for both scenarios.
