Altcoin Season Faces Challenges as Concerning Chart Pattern Emerges

Altcoin Season at risk as an alarming chart pattern emerges - 1

This article discusses the recent decline in the Altcoin Season Index and the implications of a possible double-top pattern in the altcoin market. As Bitcoin's dominance increases, many altcoins are experiencing significant losses, prompting concern for investors.

Key Takeaways

The Altcoin Season Index has fallen to a yearly low of 15, highlighting a downward trend amid increasing Bitcoin dominance.
Only a few cryptocurrencies have seen gains recently, with Pippin token leading the growth.
Several altcoins have seen substantial losses, dropping over 60% in recent weeks.
The total market capitalization of altcoins outside of Bitcoin and Ethereum has decreased significantly, raising concerns about a double-top pattern.

The Altcoin Season Index continued its downward trajectory this week as Bitcoin dominance surged. This index, which measures the performance of altcoins against Bitcoin (BTC), plummeted to 15, marking the lowest point of the year. The decline persisted as the majority of altcoins remained in negative territory.

Altcoin Season Index chart | Source: CMC

According to data from CoinMarketCap, only a minor selection of cryptocurrencies has achieved growth in the past 90 days. Notably, Pippin token skyrocketed by over 2,300%, emerging as the top-performing major token. Other significant gainers include privacy coins such as Zcash, Dash, Monero, and Merlin Chain.

Conversely, tokens like DoubleZero, Story, MYX Finance, Immutable, and Pudgy Penguins were among the major underperformers, each dropping over 60% during the same timeframe. These altcoins have struggled to keep pace with the broader market as the Crypto Fear and Greed Index fell into the fear zone with a score of 25. This trend aligns with a reduction in investor leverage, indicated by decreasing open interest.

The deleveraging process quickened following the events of October 10, which resulted in a $20 billion loss for over 1.6 million traders. This significant sell-off has diminished demand for altcoins, which are generally viewed as riskier investments compared to Bitcoin.

A critical factor contributing to the decline of the Altcoin Season Index has been the ongoing drop in Bitcoin's value. Historically, when Bitcoin falls, altcoins experience even steeper drops.

Potential Risks: Double-Top Formation in Altcoin Market

Altcoin Season Index chart | Source: TradingView

The three-day chart indicates that the combined market capitalization of all altcoins, excluding Bitcoin and Ethereum, decreased from $1.19 trillion in October to the current $825 billion. There is a risk of further decline, as this market cap has formed a double-top pattern at $1.16 trillion with a neckline at $658 billion. Additionally, the market cap has fallen below the 38.2% Fibonacci Retracement level.

The market also slipped beneath both the 50-day and 200-day Exponential Moving Averages, signaling that bearish trends are prevailing. Furthermore, the Relative Strength Index and the MACD have continued their downward trajectory over the past few months.

As such, the most probable scenario suggests that altcoins may continue to decline, with sellers eyeing the 50% retracement target at $739 billion. Should the market dip below this crucial level, it could lead to further decreases down to the neckline at $658 billion.