VerifiedInvesting.com Chief Market Strategist Gareth Soloway warned that even if Bitcoin experiences a slight decline, altcoins could face a round of adjustment. He stated that the dominance chart of Bitcoin is sending a signal, which in the past has preceded major market turns.
Why is the dominance rate of Bitcoin important?
The dominance rate of Bitcoin measures its proportion in the entire cryptocurrency market. When altcoins perform better than Bitcoin, this indicator declines; in the past few weeks, tokens such as Zcash, Chainlink, Hyperliquid, and NEAR have all recorded strong gains, resulting in a weakening dominance rate for Bitcoin.
Soloway says that many traders think an increase in dominance simply means that Bitcoin is performing better. In fact, he explains that an increase in dominance is often due to a slight decline in Bitcoin, while altcoins fall even more sharply.
Warnings issued by the chart
Soloway indicates that the dominance rate of Bitcoin has broken through a long-term downward trend line, only to fall back and test that trend line again. He believes this is part of the normal market movement. If the dominance rate can hold above this level, he expects it to continue to rise.
In his view, this implies two possibilities:
- Bitcoin remains sideways, while altcoins are weakening.
- Bitcoin sees a slight decline, while altcoins experience a significant drop.
How large could the decline be?
Soloway It is estimated that if Bitcoin falls by 10%, its price might return to the mid-range of $75,000, while altcoins could see a decline of 30% to 40%. If Bitcoin experiences a deeper correction of 20%, altcoins could see a drop of up to 50%.
He stated that the level worth paying attention to is $81,000. If the daily closing price falls below this level, it would mean that Bitcoin's current bull flag pattern is invalid, and it could open the way for a downward movement towards $70,000.
In the short term, there is still an excess of Bitcoin.
Soloway said that the short-term chart of Bitcoin still indicates a bullish trend, and he still believes that the lowest point of this cycle has already been reached. However, he also mentioned two concerns: a trend line drawn from an earlier low point is acting as resistance, and there is a trading-intensive area above the current price level, where many buyers who purchased earlier may decide to sell when the price approaches their cost price.
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