The excitement in the crypto market has been at its peak since Bitcoin reached its all time high of $122K. As the whole crypto market looks at the Bitcoin price rise with one gaze, on the side lines the altcoins are also gaining some momentum. At this pivotal point when BTC printed a new all time high, it makes altcoiners wonder whether the altcoin season has been postponed. To understand whether the altcoin season has been pushed back one needs to understand a few things like the correlation between Bitcoin and altcoins, Bitcoin dominance and the altcoin season index.
The altcoins—any coin or token other than Bitcoin, usually move in sync with the Bitcoin prices, when the correlation coefficient– the metric that measure the relationship between Bitcoin and altcoin prices, is positive.
Crypto analyst Joao Wedson stated, “A historical fact worth noting is that when the Average Altcoin Correlation tends to turn negative, it has historically been a warning sign for Bitcoin and the market in general. This negative correlation typically occurs when altcoins significantly outperform Bitcoin, often preceding a drop in BTC’s price. Whenever the correlation turns red, it is a clear signal for investors to be cautious.”
BTC vs altcoin correlation turns positive
The chart above shows that BTC prices move in tandem with the BTC vs altcoin correlation indicator. BTC has been making higher lows along with BTC/altcoin correlation. BTC vs altcoin correlation has moved into the positive zone, which indicates that the altcoins will mirror BTC’s behavior. Therefore, if BTC loses value, the altcoins will lose value, and if BTC gains appreciate, the altcoins will follow. Since the correlation is positive, the altcoin season might not be in yet.
Bitcoin’s dominance on the increase
The above chart from CoinMarketCap shows that Bitcoin dominance has been rising since 2022 and now the BTC dominance is 63%. Bitcoin dominance is a metric which compares the market cap of BTC against the market cap of all the other tokens. When the BTC dominance increases, it shows that the investors are confident in BTC and when the dominance is low, they are more into altcoins.
Altcoin season index crosses above bitcoin season
The altcoin season index, which indicates whether it’s Bitcoin season or altcoin season, has moved out of the Bitcoin season zone. This shows that although Bitcoin is gaining value, the market may be slowing, but surely moving towards the altcoin season after Bitcoin reaches its highest price. However, for now, the Bitcoin bulls will enjoy, but time will come when money will flow into altcoins.
