Bitcoin (BTC) price has been stuck in a range for weeks now but traders generally expect a slow fourth quarter for the top-ranked digital asset.
Bitcoin quarterly returns (%). Source: Skew.com
In 2018 and 2019 Q4 closed net negative, injecting a bit of bearish sentiment into the market. In the near term, a boring Q4 of further downside from Bitcoin price could cause altcoin prices to dump further.
At the moment, multiple technical analysts are closely watching the bounce in the Bitcoin dominance index to warn against an altcoin market pullback.
Has the worst already passed for altcoins?
As Cointelegraph reported, over the past two weeks most small altcoins and decentralized finance (DeFi) tokens dropped by 30% to 60%.
The slump in altcoins worsened when Bitcoin surged from $9,981 to $11,179 on Sept. 9 to Sept. 19 and during this period it appears that a take-profit rally took place. Analysts believe that profits from altcoins and DeFi cycled into Bitcoin and stablecoins.
As such, while Bitcoin saw a strong uptrend, DeFi tokens declined and altcoins remained in a steady decline.
The altcoin sell-off occurred as Bitcoin started to decline after rejecting from a key resistance level at $11,100. In the last 15 days, BTC has slipped by nearly 6%, stabilizing slightly above $10,500.
BTC/USDT daily chart. Source: TradingView.com
According to Cointelegraph contributor Michael van de Poppe, the current slump is unlikely to end any time soon.
In a tweet van de Poppe posted the following chart and explained that crypto markets typically see ‘boring and corrective’ phases during Q4. The traders said, historically Ether bottoms in December and begins to move by the next quarter.
BTC/USDT daily chart. Source: TradingView.com
Van de Poppe predicted that “BTC dominance will run up, to have an altseason in Q1 20201.”
A pseudonymous trader known as “Loma” echoed a similar sentiment. He said the last time altcoins plunged this hard, BTC saw a large drop in a short period.
This time, altcoins are declining while BTC and Ether remain relatively stable above their respective support levels. The trader noted:
“ALTs dumping right now while Bitcoin barely moving. Last time I saw that, Bitcoin painted a fat down candle.”
Is a relief rally on the cards?
Since the start of October, the cryptocurrency market has faced a number of negative events which could be weighing on investor sentiment.
On Sept. 26 KuCoin exchange was hacked for $281 million and while Bitcoin price did not correct over the news, it could be preventing the build up of bullish momentum. This was followed by the U.S. Commodities Futures Trading Commission (CFTC) announcing that it had charged BitMEX with violating the Bank Secrecy Act on Oct. 1.
Then, on Oct. 2, U.S. President Donald Trump tested positive for COVID-19, causing a stir in both traditional and crypto markets.
After several major events investors expect increased volatility and some traders have suggested that a short squeeze could be on the cards.
Another popular crypto-Twitter trader known as “Byzantine General” said it is the “perfect” moment for a short squeeze as it would shake out the weak hands. The trader also hinted that in his opinion, there is plenty of capital on the sidelines within the cryptocurrency market. He said:
“With all the uncertainty going on right now, especially in crypto, it would be the perfect moment to blast up and leave all the weak hands behind. BTW the SSR is still historically low, meaning that there is a lot of dry powder on the side lines.”
Overall, traders foresee a boring quarter ahead for Bitcoin and altcoins, but last month’s intense sell-off could eventually lead to a strong relief rally.
