How to Use the Bitcoin Dominance Chart to Maximize Profits

9 ott 2021

In this post, I'll be explaining a simple approach to the cryptocurrency market, and how you can refer to the Bitcoin Dominance Chart (BTC.D) to maximize profits.

Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.

Bitcoin Dominance (BTC.D)
- Bitcoin Dominance is simply an indicator that demonstrates the percentage of Bitcoin's market cap relative to the entire market cap.
- When Bitcoin dominance is high, it indicates that Bitcoin's market cap is relatively larger compared to that of other altcoins, and vice versa.
- So when Bitcoin dominance rises, it could either indicate that:
- Bitcoin is rising at a faster pace than altcoins (during an uptrend)
- Altcoins are correcting at a faster pace than Bitcoin (during a downtrend).
- Vice versa, a drop in Bitcoin dominance could indicate that:
- Bitcoin is dropping at a faster pace than altcoins (during a downtrend)
- Or that altcoins are rising at a faster pace than Bitcoin (during an uptrend).
- Understanding this, you can refer to the Bitcoin dominance chart to rebalance your portfolio according to market situations.

Historical Price Action

- Above, I've marked Bitcoin's price action (black), relative to that of ETH (blue), which represents the overall altcoin market.
- The captions in the chart best explain the logic behind the price action, and how dominance is affected by it.
- What's important to understand is that the situation is relative: a high dominance does not necessarily indicate that buying altcoins is a good idea.
- It's important to understand the overall market cycle and structure to determine which regions are good entries.

Anatomy of a Market Cycle

- Above, we have the market cycle explained using Elliott Waves.
- The market never moves in straight lines: It goes through phases of impulse waves, and corrective waves.
- Elliott Waves also have very strict rules that must be kept.
- Or else, the wave count is considered negated.
- Here are the rules:
- Waves 1,3 and 5 are always with the trend
- Waves 2,4 are always against the trend
- Wave 2 can never drop below wave 1’s low
- Wave 3 can never be the smallest wave
- Wave 4 can never drop into the range of wave 2 (unless it is part of a diagonal)
- With this in mind, we can now take a look at where Bitcoin is, from the larger wave count.

Bitcoin Market Cycle using Elliott Waves

- We can start counting the wave from 3.1k, when Bitcoin bottomed out around the end of 2018
- Based on this wave count, it could be said that the move up to 64K was the end of the 3rd impulse wave.
- We have recently completed the 4th corrective wave, and are on our way to complete the 5th impulse wave.
- As to why I have selected the 200k region and June 2022 as my price and time period target, please refer to my previous analysis below:

Conclusion
Bitcoin dominance is currently forming a double bottom on the weekly. With Bitcoin's wave count lining up for an impulse move upwards, I expect Bitcoin to rally upwards, outperforming other altcoins in the short-mid term. As Bitcoin paves way for the entire crypto market cap by breaking through all time high levels in Q4, we could see Bitcoin dominance reach resistance around the 60-70% range. At that point, given that the broader market cycle isn't over, it would be a good point adjust your portfolio, and scale profits from Bitcoin into altcoins for maximum returns.

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