Bitcoin Rally Cools as New Capital Flows into Altcoins

Bitcoin (BTC) swung back below $8,000 on Thursday, retreating further from its ten-month peak as the bull cycle began to favor altcoins and tokens.

BTC/USD Update

The bitcoin price was last seen trading in the low $7,900 range on most major exchanges. On Bitfinex, the BTC/USD quote price is currently down 3.6% at $7,917.

A strong case can be made that bitcoin is significantly overbought following the recent month-long rally. This is certainly reflected in the relative strength index (RSI), which peaked in the high 80s this month. Any RSI reading above 70 implies that the asset is overbought.

Nevertheless, bitcoin remains in heavy accumulation, as demonstrated by the A/D line in the chart above. The largest cryptocurrency is also trading well above the 200-day moving average. The longer it does this, the more we can be certain that a bull market is definitely upon us.

Bitcoin has run into strong resistance around the $8,300 region. Once again, this area represented the high end of the rally on Wednesday before the ensuing pullback occurred.

Read more about bitcoin’s fundamental developments here

Capital Pours into Altcoins

Alternative cryptocurrencies led by Ethereum (ETH) have taken the reigns from bitcoin in recent days, as traders shifted capital away from the leading digital currency following its relentless streak of gains. The latest bout of altcoin euphoria sent the cryptocurrency market capitalization past $263 billion overnight, the highest since August. The altcoin market cap swelled to a high of $117 billion.

Bitcoin’s dominance rate, which expresses the percentage of crypto holdings devoted to BTC, swung back below 56% on Thursday after peaking above 60% earlier in the week. The dominance rate was last seen at 56.8%. That’s the percentage of the crypto market cap held in bitcoin.

At the time of writing Thursday morning, Ethereum was up 8.1% over the past 24 hours to trade at $249.26, according to CoinMarketCap. Stellar (XLM) held onto most of its gains and was up 13.3% at $0.1363.

Bitcoin cash (BCH), EOS, Litecoin (LTC) and Binance Coin (BNB) were also in the green.

Alternative cryptocurrencies got the ball rolling on the crypto recovery all the way back in February when Litecoin broke out unexpectedly. The ensuing altcoin rally saw the likes of bitcoin cash and Binance Coin put up massive gains.

The uptrend would later rub off on several small-cap cryptocurrencies. A few that come to mind are Tezos (XTZ), Ontology (ONT), Maker (MKR) and Basic Attention Token (BAT).

If bitcoin’s dominance rate has peaked, investors can expect bigger gains for alternative assets in the near future. This simply reflects the ebb and flow of the market, which tends to move in waves.

Thought experiment: Here’s Why You Should Consider Flipping Some Bitcoin for Ethereum.

Fundamental developments around institutional adoption, merchant acceptance and blockchain business development suggest the bull market is on firm footing. However, investors shouldn’t be surprised to see a large pullback in the market at some point in the future. Since December, crypto assets have recovered some $150 billion of lost market cap. The rapid pace of acceleration could lead to sharp corrections, and that wouldn’t be out of the ordinary.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Chart via TradingView.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi