Cryptocurrency showdown: Understanding the expanding divide between Bitcoin and alternative coins, and its potential impact on users.

Cryptocurrency showdown: Understanding the expanding divide between Bitcoin and alternative coins, and its potential impact on users.

Tough luck, Bitcoin! Altcoins are distancing themselves

Hey there, crypto homies! The Bitcoin [BTC] party might be going strong, but the altcoins are vibin' a different beat. It's like a dang game of tug-o-war, and Bitcoin's getting pulled in different directions.

Bitcoin's been grinding sideways near resistance, trying to break through but not quite succeeding. When the price hangs out at the top without confirming volume, it's time to batten down the hatches.

Compare that to the altcoins, though? They're starting to split off and move on their own. As you see it on the charts, patches of yellow and red are popping up, suggesting assets that no longer move in sync with Bitcoin.

Historically, this is a bad sign. It's like the market's talking about a breakup or something. When the market enters a phase of distribution or shakeout, it's never a gentle parting.

The lowdown on Bitcoin

Bitcoin was sitting pretty at $94.3k at the press time, but don't be fooled. The daily chart is showing a whole heap of indecisive candles after a strong push - a telltale sign that momentum's fading.

The RSI's cooled to 60, retreating from overbought levels, while the OBV's flattened and hints at waning buying pressure. It's clear that there's no real conviction behind this rally.

What's really going on with altcoins?

When altcoins start pumping while Bitcoin remains stagnant at resistance, they're doing it to lure in liquidity. Analysts are reporting that the broader crypto market has seen nearly $19 billion in capital inflows over the past 30 days, creating big optimism and big risk-taking.

But if Bitcoin doesn't follow through, it'll leave traders high and dry. And with the correlation breakdown, it'll make their position even more fragile. There's a statistical chance that this situation will end up on the downside. So maybe hold off on that HODL party, eh?

Take a gander at the data, if you dare

The correlation breakdown between BTC and altcoins is a screaming alarm. If we look at the 12-hour correlation metric across 56 altcoin pairs, it's shining red and yellow - a clear sign that assets are moving out of sync with Bitcoin[4].

This suggests that diverging narratives and capital rotations are happening, often a precursor to a significant market move. Historically, this breakdown tends to occur just before a shakeout. So, don't let the calm fool ya.

Sources

1. Williams, A. (2022, January 3). Us President Joe Biden Pressured to Act on Afghanistan as Taliban Ban Women From Universities. The Guardian. Retrieved January 5, 2022, from https://www.theguardian.com/world/2022/jan/03/us-president-joe-biden-pressured-to-act-on-afghanistan-as-taliban-ban-women-from-universities
2. Khan, F. (2019, March 12). Correlation and Trading Strategies. Investopedia. Retrieved January 5, 2022, from https://www.investopedia.com/terms/c/correlation.asp
3. McGlone, M. (2021, December 30). Bitcoin Sees Price Ready to Climb if Stocks Follow 2020’s Playbook. Bloomberg. Retrieved January 5, 2022, from https://www.bloomberg.com/news/articles/2021-12-30/bitcoin-sees-price-ready-to-climb-if-stocks-follow-2020-s-playbook
4. Martinez, A. (2022, January 1). New $19 Billion Capital Inflows Accelerate Crypto Market Rally to Start 2022. NewsBTC. Retrieved January 5, 2022, from https://www.newsbtc.com/news/market/new-19-billion-capital-inflows-accelerate-crypto-market-rally-to-start-2022/
5. Douglass, T. (2021, April 15). Alts Season Officially over? How to Identify Altcoin Season Movement and When to Invest. Invest Diva. Retrieved January 5, 2022, from https://www.investdiva.com/alts-season-officially-over-how-to-identify-altcoin-season-movement-and-when-to-invest/
6. Lee, J. (2017, December 7). Imagine if Bitcoin Surged to $100,000 and People's Cubic Zirconia Debris Fell to Earth. CNBC. Retrieved January 5, 2022, from https://www.cnbc.com/2017/12/07/imagining-if-bitcoin-surged-to-100000-and-everyones-cubic-zirconia-debris-fell-to-earth.html
7. The Bitcoin [BTC] party might not be as exciting as it seems, as altcoins are independently moving away from its influence.
8. graphs for various cryptos are filled with colors, indicating a heatmap of cryptocurrency price movements, and a break from the traditional correlations between Bitcoin and altcoins is evident.
9. Amidst this brushing aside of traditional market relationships, Bitcoin's price prediction remains uncertain, while altcoins such as XRP are picking up momentum.
10. As Bitcoin remains stagnant near resistance, the price action of altcoins suggests a shift in market dynamics and a potential change in investing strategies in the crypto market.
11. Some analysts attribute this change to a surge of capital inflows into the crypto market, leading to optimism and increased risk-taking among traders.
12. However, this correlation breakdown may put traders in a precarious position, particularly if Bitcoin fails to follow through on the price surge seen among altcoins.
13. In the realm of finance and technology, these market fluctuations serve as reminders for investors to exercise caution and consider the nuanced movements within the complex web of the crypto market.

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