Bitcoin hits year’s high, altcoins struggle to keep up

May

Bitcoin hits year’s high, altcoins struggle to keep up

#Bitcoin, #Blockchain, #Crypto, #Cryptocurrency

News

It was a great day for bitcoin yesterday, pushing into the resistance zone just beneath $6,000. It’s feeling very bullish!

Two caveats. One is that when it feels maximum bullish, it’s often about to look very bearish. As contrarians will tell you, doing the opposite to everyone else can be smart (buy when there’s blood in the streets – not bubbles in the air…). The second is that when bitcoin does this, the alts often get hammered – or, at the very least, don’t keep up. That’s sad if you’re an altcoin hodler, but the good news is, it probably won’t last forever.

BTC vs alts

When bitcoin goes on a tear like it has this week, alts often drop in BTC terms, even if they still stay level in USD. That’s because traders sell alts in order to hold BTC, which is rising in value.

When BTC stops rising, there’s a good chance that value will come back into the alts – traders will pick up coins they feel are undervalued. BUT that only happens if the market is expecting BTC to plateau for a while, and traders are looking for value elsewhere. If they think it’s just a short pause before bitcoin rises again, then the chances are the alts will stay down.

A situation to watch is when alts rise in BTC terms and BTC rises against the US dollar. That gives you leveraged gains on the alts, and it means that money is flooding into the crypto space as a whole – not just bitcoin. That’s a very positive sign overall. It means that alts are being bought with bitcoin, but even more bitcoin is being bought from new demand. (Some coins are more likely to do this; LTC, for example, often moves in step with BTC, without a lag.)

You can generally gain a sense of what’s going on by comparing coins on https://coinmarketcap.com/. Just look at which coins are in the green and have gained more than BTC.

Watch profit-takers

One word of warning. When BTC rises, traders buy BTC – with fiat or by selling alts. But not all alts are the same. Smaller alts get hit worse, while high-quality ones tend to drop less. Traders keep these, knowing that money will come back into them sooner rather than later. However, there are certain times when a coin will take a worse hit than others its size. Take a look at BAT, for example. On Friday, it was one of the only tokens in the top 50 to be in the red. The reason? Probably simply that it had enjoyed a huge rise in the preceding months, and was a good target for profit-taking.