Bitcoin nears US$50,000: Why have altcoins plummeted?
The altcoin market plummeted as Bitcoin hit a new all-time high and approached US$50,000.
Altcoins plummeted on 14 February after the Bitcoin (BTC) price hit a new all-time high above US$49,000.
The timing of the altcoin market’s decline is interesting because it happened while BTC was rallying. That is not normally the case.
So why exactly did altcoins plummet?
There are two main reasons why the altcoin market has declined despite Bitcoin’s strength.
Firstly, Bitcoin’s rise to a new record high has taken most of the volume in the Bitcoin Storm cryptocurrency market for itself. This naturally caused the market to swing towards BTC and contributed to the decline of altcoins.
Secondly, Ether (ETH), which often leads the momentum of the altcoin market, fell sharply against Bitcoin.
The combination of these two factors, combined with the uncertainty surrounding Bitcoin at the US$50,000 resistance level, has increased the selling pressure in the altcoin market.
Trader „Kaleo“ pointed out that the forecast of a Bitcoin rally to US$50,000 had been close.
The direction of the crypto market in the short term depends on whether BTC breaks through the US$50,000 mark. He commented:
„The rise to just below US$50,000 was incredibly easy to see. The real question is what happens next. I’m leaning towards a short consolidation and a breakout of the range, but I’m not entirely sure. How long will it last? Will it bounce off the bottom? I don’t know.“
If Bitcoin consolidates first before breaking out above US$50,000, this trend would theoretically favour altcoins in the foreseeable future.
In a Bitcoin uptrend, altcoins tend to rise when BTC consolidates after an initial momentum rally. However, when BTC rallies or sees a slight decline, altcoins also often see large price losses against BTC and the US dollar.
Bitcoin bullish for now and thus helpful for altcoins
Currently, Bitcoin is maintaining its bullish market structure. This alleviates some of the selling pressure in the altcoin market for the foreseeable future.
Scott Melker, a cryptocurrency trader and analyst, said Bitcoin continues to send positive signals.
Bull signals are a market structure in technical analysis that occur when the asset breaks out after consolidating within a range.
This typically shows a stair-step rally that is sustainable over the longer term. Melker commented:
„Small bull signals everywhere. Finally closed above US$48,200 after 7 rejections. Consolidation below resistance typically leads to a breakout.“
As long as Bitcoin defends the newly established support at US$48,200 and consolidates between US$48,200 and US$49,700, another breakout is more likely.
If Bitcoin records another breakout, it is likely that the altcoin market will rise along with Bitcoin, following an initial dip in BTC’s first impulse rally.