With the Binance news this morning about limiting access to U.S. investors, it seems appropriate to revisit Bitcoin (BTC) dominance. Our previous view was that Bitcoin (BTC) dominance had topped.
The assumption behind this view was that other big coins like Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC) would rally and pull the small-cap alt universe up with it.
The Bitcoin (BTC) dominance chart shows the measure near a key technical inflection point at 57%. That level is a prior top from December 2017 and September 2018 (Figure 1). If Bitcoin (BTC) dominance smashes above that level, it is possible that the crypto market is entering a phase that many have talked about. Namely, a world where only Bitcoin (BTC) will survive.
If Bitcoin (BTC) Dominance does not burst through 57%, we would consider that a positive sign for the crypto space overall. In this scenario, big coins would hold up or rally as alts experience work through a potential technical analysis crisis.
If you look at a major alt like Binance Coin (BNB), BNBUSD has the potential for a very negative chain reaction. If today’s decline spills over into the weekend, there is a chance negative stochastics divergence could kick in (Figure 2). That would make the bearish picture even more bearish.
Bottom Line: 2019 has seen the crypto market shake off bad exchange-based news. To us, the Bitfinex incident with Tether seems worse than the Binance news. So we expect Bitcoin (BTC) and big caps to hold up. Alts, on the other hand, seem extremely vulnerable. This down move has all the hallmarks of a purge in speculative excess.
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