Bitcoin dominance and Alt season
Bitcoin dominance is said to be over 90%, according to a recent study and article from Forbes from Aug 22, 2019 if you take liquidity into account. This is no real news, as there have been a lot of discussions about this in the past, such as the article “Bitcoin’s True Market Dominance” via JP Thor from March 22, 2019. The question for me is though: can we trust this data? And is alt season maybe already there, without us even noticing?
This is the current situation as of Aug 26, 2019: Bitcoin Price Indicator shows the first ‘Bear Cross’ since February (see CoinDesk) and Bitcoin dominance is almost at 70% according to coinmarketcap. The lowest “dominance” has been on Monday, Jan 8, 2018 with 33.41% — back then there definitely has been “Alt Season”.
Cryptoslate wrote on Aug 13 that Bitcoin dominance could retrace and trigger an altcoin bull market. This is interesting, but there are no real indicators when this could happen, or are there? I am trying a few different attempts here to outline possibilities based on recent market data and experiences.
Firstly, let’s no overestimate the relevance of the “Bitcoin Dominance Index”. As has been already mentioned by fxcm, the Bitcoin Dominance Index has its limits and has a lot of criticism surrounding.
Bitcoin Dominance Index was originally created to illustrate how much importance Bitcoin, the first digital currency to scale, had in the overall crypto economy (Jimmy Song)
So what are the limits and problems of the Bitcoin Dominance Index in tldr;?
Bitcoin Dominance index is only taking reported volumes and trades into account: this excludes private cryptocurrency such as Monero, and also leaves out the OTC market. It is further based on wrong trading data: you can compare OpenMarketCap (Cryptocurrencies without fake volume) and CoinMarketCap to see already different reported volumes there. According to different sources, > 95% of Bitcoin’s reported trading volume is fake.
Still, if we take the Bitcoin Dominance Index into account as “sentiment”, we might be able to predict Alt Season.
Theory #1: Alt Season starts autumn 2019, as suggested by the “Bitcoin dominance index” and taking past data into account
If we look at the data from the past years, we see alt season would be starting this autumn, if the trend continues.
This is a bit of a long-shot though, and i don’t know if we can correlate the data like this. If you have any suggestions, please write in the comments.
Theory #2: Alt Season is already there, but we are not seeing it
A more possible scenario is that Alt Season is already there, but not visible to the “regular crowd”. According to a recent interview with the head of the Kraken OTC Desk — Kraken OTC trading volume has increased 2,000% since 2018. I cannot stress this information enough: Kraken OTC 20x’d its volume since 2018 and the top 5 assets have been Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Monero (XMR) and Tether (USDT).
So what does that show us? The visible volume on cryptocurrency exchanges seems to be decreasing, but the “shadow volumes” are increasing. I am drawing the conclusion that Alt season is already here, and the big players in the space are slowly accumulating. Not all altcoins, but at least the top assets out there. My theory is backed by looking at the daily volumes and at the small and steady buys across exchanges.
Conclusion
- Growing OTC market while “official” numbers on exchanges are decreasing (hear the interview with the head of the Kraken OTC Desk).
- Anonymous assets such as Monero show steady increase in transactions (see the Monero Transactions historical chart), but decrease in buy orders on exchanges (example: the BTC/XMR pair on Poloniex where the order book strangely stays at the same amount, as the daily volumes rise). DoctorBlade1 on reddit has pointed to the info that Bisq volume has been increasing, which also supports my theory.
- Alt season might be already there, as whales are accumulating.
Finn Corbis is a tech writer and cryptocurrency enthusiast. He works as freelance writer, editor and market observer. For inquiries and requests, please use the contact form.
