Altcoins show signs of awakening following the BTC breakout
The crypto market is going through a decisive phase. Currently trading around $81,000, Bitcoin is leading the charge. Its dominance has broken through the key 61% resistance level, confirming an underlying trend where institutional and retail capital favors the security of BTC. This movement has temporarily put lower market caps under pressure, creating an uncertain climate for investors.
However, beneath the surface, recovery signals are emerging. Recent data shows that the volume share of altcoins listed on Binance surged to reach 49% in March, compared to just 31% the previous month. This renewed interest suggests that traders are slowly starting to position themselves on riskier assets, anticipating a potential capital rotation once Bitcoin takes a breather in its bull run.
Furthermore, the TOTAL3 index, which excludes Bitcoin and Ethereum, recorded a 17% increase, reaching a two month high of $765 billion. Although the recovery pace is slower than that of BTC, approximately 12.6% of altcoins have managed to reclaim their 200 day simple moving average (SMA), a crucial technical support level to validate a trend reversal.
Fibonacci extensions indicate a potential target of $1.7 trillion by the end of the cycle. This represents a potential 119% upside for the overall market of altcoins in the coming years.
Moreover, the fact that capital flows first into Bitcoin is extremely healthy for the crypto market. A healthy order flow is indeed necessary to sustain a long term bull run. For this to happen, Bitcoin must rise first, allowing profits to eventually rotate into large cap altcoins like Ethereum or Solana. From there, liquidity trickles down to smaller altcoins, and finally to memecoins, rather than the other way around.
Technical analysis: Will Bitcoin suffocate the market?
From a technical standpoint, Bitcoin’s overwhelming dominance, estimated at 61.3% by some analysts, illustrates a market still hesitant to trigger a true AltSeason. The altcoin index is stagnating around 28.6, far from the 75 threshold needed to confirm a widespread bullish cycle. As long as BTC does not undergo a significant retracement or consolidate within a tight range, liquidity will struggle to flow massively into small caps.
Nevertheless, indicators are showing a clear improvement. The average altcoin is currently trading 23.47% below its 200 day SMA, a strong recovery compared to the 44.4% observed earlier in the cycle. This setup is reminiscent of the late bearish phases of 2022, where oversold assets accumulated strength before a violent breakout toward new ATHs. If the MACD and RSI of major altcoins confirm bullish divergences, a spectacular rebound could catch short sellers off guard.
From a charting perspective, Bitcoin dominance could break out toward the 70% mark.
Two scenarios are emerging. In a bullish scenario, Bitcoin stabilizes its price, allowing altcoins to break their respective resistances and catch up. Conversely, a bearish scenario would see BTC vacuum up even more liquidity and repeat its performance from the previous cycle, leaving altcoins unable to keep pace.
In this context, only a handful of altcoins will continue to dominate the market. Investors will need to be highly selective and only choose altcoins that show genuine momentum with every BTC rally. Furthermore, it is essential to monitor the altcoins that have the most bearish order blocks on HTF charts.
Is this the right time to accumulate altcoins before the next surge?
This month of May appears to be the ideal time to DCA into your favorite altcoins. However, you must remain selective and only pick altcoins that still seem undervalued by the market while boasting strong momentum and an active community.
For now, several altcoins stand out as obvious choices: Zcash, HYPE, LINK, MON, and TAO. This selection allows you to gain exposure to almost every sector with an attractive growth potential.
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