Altcoin sentiment is at extreme lows, but that’s not the only thing reaching extremes. The dominance of Bitcoin, a measure of the top cryptocurrency by market capitalization relative to the rest of the space, also reached the most extreme reading ever in a technical indicator known for its precise timing and ability to determine reversals.
If correct, it’s only a matter of time until altcoins surpass BTC once again.
Why Bitcoin’s 50% Dominance Level Is Critical
In recent weeks, BTC’s dominance reached over 50% – an important psychological level in the relationship between Bitcoin and altcoins. While the metric has been much higher – and lower – in the past, the idea that one currency is the size of all others combined is a massive achievement.
But after reaching just 2% above the 50% zone, Bitcoin dominance has struggled to push any higher and found resistance. The first signs of a potential change began after XRP was deemed not a security by a US judge. Since then, the relationship between Bitcoin and alts has changed course.
The change in course coincides with the Fisher Transform turning back down from the most extreme reading in the history of the 2W BTC.D charts.
The Fisher is turning down from +4 std. deviation | BTC.D on TradingView.com
Fisher Transform predicts a potential Altcoin season
The Fisher Transform, created by John Elhers, converts price action to a Gaussian normal distribution in order to better highlight precise turning points in markets.
The tool’s readings are based on a standard deviation, where readings on the extreme side of the bell curve are rare, and thus have a higher probability of reversal once the signal decreases. Such moves to extremes require great strength behind the underlying trend. But even the most powerful trends must eventually come to an end.
The reversal from the 2W BTC.D all-time high may suggest that the trend favoring Bitcoin is over and altcoins will outperform for the foreseeable future. Whether or not this leads to a sustainable altcoin season remains to be seen.