Key Points
- Altcoins may be set for a strong recovery after January’s sell-offs, potentially outperforming Bitcoin.
- Bitcoin and Tether’s dominance are at pivotal points, suggesting potential capital rotation to altcoins.
The altcoin sector could be gearing up for a robust rebound after the sell-offs in January, potentially even outperforming Bitcoin (BTC).
This is according to data from analytics platform Alphractal, which indicates that the Altcoin Season Index is at a critical point, potentially fuelling a short-term recovery for the sector.
Altcoin Recovery and Bitcoin’s Role
According to Alphractal, the Altcoin Season Index has historically bounced back whenever it hit the lower range. The recovery typically follows BTC’s lead, suggesting that the recent increase from under $90k to $97k could stimulate the sector.
However, it’s important to note that another popular altcoin traction indicator from Blockchain Center is currently neutral. This means it is neither an altcoin season nor a Bitcoin season, and the market could swing either way.
Despite this, BTC currently has the upper hand, especially considering the potential pro-crypto updates that might follow recent political events.
What’s Next for Altcoins?
To predict the future of the altcoin sector, it’s useful to examine BTC and Tether’s USDT dominance. Both are inversely related to altcoin momentum, meaning a decrease in BTC and USDT dominance could signal a capital shift from BTC to altcoins and increased buying pressure.
This was observed during the altcoin pump in November, which corresponded with a drop in BTC and USDT market dominance. At the moment, BTC.D has reached a trendline resistance, while USDT.D appears to be retreating lower. If both indicators continue to decline over the next few days, Alphractal’s projection could be confirmed.
It’s worth noting that some top altcoins, such as XRP and Hedera (HBAR), have outperformed BTC so far. Over a 90-day period, XRP and HBAR’s values increased by 450% and 600% respectively, while BTC only saw a 52% gain.
