The Fed’s decision to hike interest rates for the first time since 2018 to combat growing inflation has sparked a reaction from global financial markets, including Bitcoin.
Bitcoin has lost nearly half of its value after hitting an all-time high of $69,020 in November 2021. The bottom of the decline as Bitcoin continued to move lower reached $33K on January 24, and the digital asset is now up 16 percent at current pricing.
Let’s take a broader look at the market on a larger scale and over a longer period of time, focusing on major altcoins with strong fundamentals from the market’s peak.
The charts reveal that major altcoins have lost more than 70% of their value since their peak. Let’s revisit these Altcoins since the Bitcoin trend bottom on January 24.
While bitcoin has recorded higher lows, the current price is 16 percent higher than it was on January 24th, according to the charts.
Now, my understanding is that we had a capital transition from Altcoin to Bitcoin during this strong bitcoin sell-off (since January 24). However, this cash flow has yet to be fully deployed (cash on the sidelines), and 90% of altcoins do not go below 70%.
As long as the bulk of altcoins do not suffer further, then there will be a continued Bitcoin aggressive sell-off.
This implies that:
- The major player’s capital has changed from weak hands (Altcoin) to strong hands (Bitcoin)
- Weak hodlers (Altcoin) because of excessive falling, and strong hodlers (Bitcoin) because of supply exhaustion and slowdown
According to the following scenario, at least 80% of altcoins, even the good ones, could lose more than 70% of their value since the December high, and the sell-off may not necessarily mean Bitcoin’s will form a lower bottom.
You can then wait for capital to flow (from Altcoins to Bitcoin), prompting altcoins to suffer further while Bitcoin’s dominance rises, before a new rally begins.
To wrap up my analysis, I’d want to point out that all cryptocurrencies have experienced market downturns in previous cycles. As a result, it is preferable to examine the market free of psychological prejudices and attempt to deal with it using proper analysis. I hope you find my assessment to be helpful.