ALT Season or ALT Seizure?
An alternative interpretation of Benjamin Cowen’s thesis on the TOTAL3/BTC Ratio.
Firstly — Thank you Benjamin, for your sobering thoughts in an intoxicated Altcoin market…
Let’s recap Benjamin’s thesis:
(See the chart below)
Blue line = (TOTAL3 — USDT m-cap)/BTC
Red lines = Benjamin’s ratio support level
In the previous cycle, the breakdown came just as the Fed started cutting rates. We are now anticipating rates to be cut once again as the support line is tested. Therefore, if the support breaks, it is probable (though not certain) that ALTs will once again bleed out against Bitcoin as this ratio enters into a prolonged downtrend.
You can view Benjamin’s thesis on his YouTube Channel:
Our alternative thesis
(See the chart below)
Let’s consider the same chart, but add the following:
Orange line = BTC price
Green lines = previous and current ATH
Red lines = I have left the past cycle line unchanged but moved the current cycle line up to a higher support. This makes sense as there are now many more Altcoins than in the previous cycle and thus their share of the total market cap is larger than in previous cycles.
We see that in the past cycle, the ratio broke down through support (red line on left) as BTC made its first surge after the 2018/2019 bear. Then, in 2020 when BTC surpassed its 2017 ATH @$20k, the ratio made a final quick flush down and took off into ALT season.
In the current cycle, we saw, again, that the ratio broke down through support (red line on right) as BTC made its first surge out of the 2022 bear. On Tuesday this week, BTC made a brand new ATH and we suggest that we might once again see a final quick dip before the next full-fledged Alt season takes off. See the white projected path on the chart.
Why do we think our thesis is more likely to play out?
Both Benjamin’s and our thesis make logical sense, and either could play out. But for us, it comes down to one thing: We think that Bitcoin’s breach of its all-time-high and the subsequent attention and speculation this attracts, is much more impactful than the Fed starting to cut rates by 25 basis points in the near future. However, the thesis hinges on Bitcoin making the ATH breakout. If it fails to do this, then all bets are off.
Happy trading
The NumetaStrategies Team.
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Disclaimer
The views expressed in this article are the views of Numeta Strategies and are subject to change at any time based on market and other conditions. This is not financial or investment advice, nor a solicitation for investment funds and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.
