ABSTRACT
We all know the saying behind 'alt-coins follow Bitcoin', and summarized briefly, it's due to the cumulative cash-flow that is carried by market momentum. A simplified version of this could be represented by the cash flow from Bitcoin -> Ethereum -> Altcoins.
It is undoubtedly true that Bitcoin is in a second-peak cycle, recently just hitting a new all-time high. However, historically with such moves, will a cumulative, follow-up alt-season occur soon after. Timelines are uncertain due to each cryptocurrency's relative size and distribution, but a major alt-season is prophesied to occur anywhere from a few weeks to months. Combined with the reasoning of this prediction, this post will attempt to further explain the macroeconomics behind alt-seasons.
It's recommended to read a case-study summary of the most recent May alt-season to get caught up: https://www.reddit.com/r/CryptoCurrency/comments/o20ofs/the_economics_behind_altseasons_a_case_study_of/
WHAT NEEDS TO HAPPEN FOR AN ALT-SEASON
Bitcoin needs a strong, upwards rally that accumulates momentum, enough to sustain a divergence of total crypto market cap v. Bitcoin. In layman's terms, this means a strong Bitcoin that holds its price very well, long enough for alt-season to begin anywhere from a few weeks to months later, dependant on each cryptocurrency's relative size.
Case Study #1
As demonstrated in Figure 1, where Bitcoin's price trend diverges from the rest of the crypto market cap, which will now be referred to as 'Market', causes a power vacuum of cash flow that causes an alt-season. The effects of this initial alt-season are demonstrated in Figure 2 with Ethereum's valuation, and Figure 3 with Cardano's valuation. Needless to say, the effects of divergence and subsequent power-vacuum, and alt-season are quite obvious once modelled under the right circumstances.
Case Study #2
Another, more recent example of alt-seasons can be retrieved from the May alt-coin season. As demonstrated in Figure 4, a massive divergence was created from Bitcoin's residual market momentum. Figure 5 portrays Ethereum's reaction to the divergence.
CURRENT CIRCUMSTANCES OF A DIVERGENCE, AND PREDICTIONS
Due to Bitcoin's second leg of the bull-run to a new all-time high, there seems to be another divergence forming, as demonstrated in Figure 6 and insinuated by Bitcoin's current price trend. As a result, as you could've already guessed, Ethereum is already tagging along, just recently hitting a close high of 4.4k USD, as demonstrated in Figure 7. Of course, other altcoins like Cardano, who lie closer to the bottom of the simplified cash-flow sequence of BTC -> ETH -> Alt-coins, are lying dormant, if not, even going down, as demonstrated in Figure 8! But don't worry, with time, even your pet project of an alt-coin will rise up.
TO CONCLUDE
Another alt-season is almost set in stone to happen, and depending on your cryptocurrency's relative size, is to happen from within a few weeks to months, excluding Ethereum of course, which I personally do not consider as an alt-coin.
I hope this due diligence helped clear up all the recent spewed-out copypasta of how cash-flow works in the cryptocurrency space. Understanding such variables and events can be both extremely entertaining and profitable, and as a result, are one of the essential skill-sets of any investor out there. All content displayed was created and developed by me, using third-party software.
Any questions, advice or corrections would be spectacular. Cheers!
Cringy Disclaimer Required By Law: I am not a licensed financial advisor nor does this content attempt to replicate any of the sorts. This content is listed strictly for entertainment and educational purposes. When in doubt, contact a professional. Your money, your problem.
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