In my opinion, the dominant pattern in bitcoin dominance is the symmetrical triangle we are currently forming. Maybe it's obvious to everyone but I haven't seen anyone talk about it.
https://www.tradingview.com/x/l7Jm7iJA/
The trendlines intersect in early May, so I would expect that by late 1st quarter/early second quarter of next year, the medium term direction of bitcoin relative to other altcoins.
We don't know whether or not it will break up or down. However, I would expect it to break up, for several reasons.
1) Bitcoin functions as a competitor to gold without any additional changes or development. It is essentially a complete project, and to be honest, doesn't really need to scale at the base layer in order to compete with gold. It makes some sense that, due to its stock to flow, and the "digital gold" narrative, bitcoin might have a market cap similar to gold.
Ethereum, by contrast, is not complete compared to what it is trying to do. It is currently trying to move to Ethereum 2.0, and that project is possibly years away from completion (rollout keeps on getting pushed back, for one). And of the all the altcoins out there, Ethereum is the best developed.
It just doesn't make sense for the altcoin market to be valued equally to or higher than an asset class like gold. I expect that the market will price in the incompleteness of altcoin projects relative to bitcoin as market caps rise.
2) Just look at some of the headlines. You have microstrat and square purchasing giant amounts of bitcoin. You have IRAN accepting payments in bitcoin. Do you see any other companies making large purchases of Ethereum or other altcoins?
Likewise, look at the headlines when paypal allowed its users to purchase bitcoin. Were the headlines "Paypal lets its users purchase Ethereum"? Or were they "Paypal lets its users purchase Bitcoin and Ethereum"? NO! They were "Paypal lets its users purchase Bitcoin".
What this all illustrates is that bitcoin is a known quantity compared to Ethereum and altcoins. So when crypto starts getting attention, Bitcoin will lead the way relative to altcoins.
3) Maybe you don't believe me because my name is u/Happy_Pizza_ and not u/Rambo_Degen_God_Trader. If so, then take it from Messari. In their report Crypto Thesis for 2020 (which, for the record, is a year old), they basically agree with me.
- Bitcoin will lead, or alts will bleed An interesting thing about crypto is that bitcoin has not actually led a supercycle rally since 2013. There’s evidence to suggest that, back then, family office and accredited investor interest in the Bitcoin Investment Trust led the rally. In 2017, it was ETH and ICOs that led the rally. I remember being at the Enterprise Ethereum Alliance’s inaugural event, and it was a who’s who of “blockchain, not bitcoin” folks from the major corporates. I thought, “oh fuck, maybe I should buy some ETH just in case,” then all hell broke loose with people raising $30 million in 30 seconds with ETH. You made money in ETH / ICOs, then you “sold” into Bitcoin on Poloniex. That was the formula. It wasn’t until later in the year that bitcoin became its own thing again following the resolution of the SegWit2x stalemate.
Why does this history matter? Because bitcoin itself hasn’t sparked a proper rally in six years, and the much hyped “halving” narrative is bullshit because the magnitude of the decline in new issuance as a percentage of market cap is tiny. Instead, the 2013 and 2017 rallies were driven by new types of buyers. It just so happens bitcoin is the most likely asset to attract the next major new type of buyer again today: institutions. There won’t necessarily be a sudden surge higher. Instead, it will be more like a snowball: one off announcements of adoption begin to increase in frequency before the price begins to tick slowly higher. I think bitcoin hits a new high before we go macro “risk off” again.
However, it's not all bad news for alts. I think bitcoin dominance will spike to the 80% range, but after that, we will be set up for a pretty nice altcoin season in the latter half of 2021.
Why? I think there are a few reasons.
1) If bitcoin starts breaking +100k prices, that will bring an enormous amount of money into the entire crypto sphere. Retail will feel that bitcoin is too expensive and put money into altcoins they perceive as less expensive.
2) Savy crypto hodlers and traders, who know enough about altcoins to have opinions of them, will almost certainly rotate some of their bitcoin gains into altcoins.
3) Altcoins deserve to be funded. Some of the stuff they are doing with decentralized finance is pretty interesting and does not compete directly with bitcoin. People will see the potential for profit to be made, they will look for the next bitcoin, ect.
Because of this, I expect bitcoin dominance to look something like this, for 2021.
https://www.tradingview.com/x/OwTDWhfy/
Bounce to +80% dominance late 1st quarter early 2nd quarter 2021, ending some time in mid year, then a move back to the upper 60% range in the later half of the year.
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