Bitcoin’s recent breakout was a buy signal that caused even Wall Street to stand up and watch, and the cryptocurrency is now by far the best performing mainstream asset of 2020.
The powerful bullish impulse decimated altcoins as crypto investors dumped the capital instead into Bitcoin. But according to PrimeXBT analyst Kim Chua, the recent crash in altcoins was actually an ideal buying opportunity in disguise and that an “alt season” is on the horizon.
With how well Bitcoin is performing and the current economic climate, this might be the furthest thing from investors’ and traders’ minds. But here are Chua’s reasons for why an extended period of altcoin over performance is around the corner.
Bitcoin’s Recent Rally Crushing Altcoins Was Hidden Buy Opportunity
Over the last several weeks, Bitcoin has been seemingly unstoppable. Following a retest of resistance turned support at $10,000, the leading cryptocurrency by market cap exploded by another nearly $6,000 to a high of just under $16,000.
During the spike, crypto investors and traders dumped their altcoin positions en masse in exchange for BTC. The trend further helped boost Bitcoin’s bullishness, but it crushed altcoins in the asset’s wake.
The massive divergence between Bitcoin and altcoins can be seen in the BTC dominance chart below. BTC dominance weighs Bitcoin’s market cap against the rest of the crypto market and is a significant barometer for the health of the altcoin space.
BTC dominance also rallied to resistance around 66%, where it was stopped in its tracks. At that point, several top altcoins reversed, outperforming Bitcoin by a large margin. Anyone who was buying altcoins while Bitcoin was rising instead of selling them could have been buying the “bottom” or “blood in the streets,” as it is called.
Rising BTC Costs Could Encourage Capital To Flow Into Altcoins
With most altcoins gaining more than Bitcoin’s 20%, it’s a sign that “new money is coming into the cryptocurrency market,” Chua claims.
The PrimeXBT analyst attributes the shift toward altcoins to two primary fundamental and technical reasons. Chiefly, as the cost of Bitcoin rises, “newcomers to the market may opt for cheaper altcoins that are more financially attainable.”
“This will not detract from Bitcoin’s attractiveness to institutions and companies but will open up the flood gates for retail money when it begins to flow back into crypto at the rates it once was.”
Several top altcoins were also listed on PayPal as part of their recent crypto support, exposing cheaper cryptocurrencies to mainstream buyers.
In addition, Chua believes that as the cryptocurrency market begins to heat up again, even those that can afford a full Bitcoin will still begin to “diversify their portfolios” by carefully layering in altcoins that could provide a more significant return.
The altcoin space also has plenty of momentum brewing, as Chua points out. She calls attention to the potential positive response to the launch of ETH 2.0 staking. Staking Ethereum will require 32 ETH, and the demand could drive up supply and make Ethereum trading even more attractive.
Lastly, the low BTC supply regularly exiting exchanges also could further push demand toward altcoins, as there will be even less and less BTC available as time goes by.
Diversify A Trading Portfolio With PrimeXBT Ahead Of The Coming Alt Season
Chua concludes that the early signs of an alt season are mounting, even if the actual phase of altcoin overperformance isn’t yet here. That’s a positive thing for traders who can still get ahead of the upcoming trend shift between Bitcoin and altcoins.
Using PrimeXBT offers, traders can build a diverse portfolio of CFDs on Bitcoin and altcoins like Ethereum, EOS, Ripple, and Litecoin. PrimeXBT’s list of assets almost mimics the coins PayPal will be supporting, making them even more attractive in the coming months as support for crypto rolls out to the brand’s 346 million customers.
In addition to crypto, the award-winning trading service PrimeXBT exposes traders to stock indices, forex, gold and oil trading. The platform offers good trading fees and a lot of different order types.