Key Insights
- •Bitcoin dominance hovers below a key level, echoing past altcoin strength phases from 2021 and 2022.
- •BTC touches the lower liquidity band, a zone that marked reversals after the COVID and FTX crashes.
- •Short liquidations exceed longs, suggesting volatility spikes caught bears during recent price swings.
Bitcoin dominance (BTC.D) was around 60%, sitting just below its 50-week moving average on the weekly chart. This level has played an important role in past cycles. In both 2021 and mid-2022, similar setups were followed by drops in dominance and stronger performance from altcoins.
The current structure looks similar. If dominance falls from here, it may open the door for altcoins to gain market share. That can happen if altcoins rise faster than Bitcoin during a move up, or fall less during a drop. One trader noted, "The pattern looks familiar, but there’s no clear move yet."
Market Faces Two Possible Paths
A recent post asked where Bitcoin stands in the cycle. Two possible outcomes were given. One, Bitcoin goes up and altcoins outperform. Two, Bitcoin goes down and altcoins fall, but not as much.
The chart allows for both. If Bitcoin moves higher but dominance falls, it means traders are rotating into altcoins. If Bitcoin drops and dominance still falls, it shows relative strength in altcoins. Past cycles have shown both setups. Current positioning suggests a possible shift, but no confirmation yet.
BTC Sits on Global Liquidity Support
Data shows Bitcoin was testing the lower end of the global liquidity bands. These bands track how Bitcoin trades relative to global liquidity levels. In past cycles, this lower band acted as support. Bitcoin bounced from this zone during events like the COVID sell-off in 2020 and the FTX crash in 2022.
Bitcoin was back at that same level. If it drops below, it would be the first time since the FTX collapse. Some market watchers say this area shows undervaluation. Others are more cautious. One comment reads, "If Bitcoin breaks under this level, we’re in untested territory."
Liquidations Show Volatility Risk
Coinglass data shows short liquidations at $5.51 million and long liquidations at $3.66 million. This comes as Bitcoin's price has dropped from over $120K to under $90K.
Even with the downtrend, short sellers have faced more forced closures than long traders. This suggests price moves may have caught bears off guard. Liquidations on both sides point to rising volatility, with no clear trend yet in control.
