Altcoins Experience Tailcoat Effect on Bitcoin Rally
Bitcoin’s rally has thrown up some interesting results on January 4, with altcoins surging and following Bitcoin higher with a tailcoat effect. Cryptocurrencies such as Dash, Monero, Ethereum, Ethereum Classic, Counterparty, and Factoids displayed impressive gains, with most appreciating more than 10 percent on the day.
Usually while as bitcoin rallies, altcoins experience losses, as most are paired with bitcoin instead of fiat. But are we now seeing a breakdown of that general relationship, with altcoins now surging supported by the bullish momentum in Bitcoin?
Now that bitcoin is here to stay after breaking the $1000 psychological level, and its existence ingrained into history and the collective psyche of the world, altcoins were predicted to rally by @drei4u on Twitter in December 2016:
Providing insights into the changing relationship between bitcoin and altcoins, Chris Burniske, blockchain analyst and product lead at ARK Invest, stated that bitcoin’s gain are beginning to work their way through the cryptocurrency ecosystem. Bitcoin holders are looking to diversify their position and put earned profits into altcoins with potential.
The growth in Bitcoin values has enriched many who adhere to the cypherpunk philosophy, as well as the anarcho-capitalist and related beliefs, so an aversion to fiat may be pushing the value of the entire cryptocurrency market higher.
Burniske told MarketWatch:
“Cryptocurrency people don’t generally take profits into fiat currency. Instead they take profits, and reallocate into other crypto. If investors reinvested gains into other digital currencies, the market for altcoins would double in size.”
The second largest cryptocurrency by market capitalization, Ether, is up more than 12 percent so far today. A break above the key resistance at $8.89 foretold of the gains that have been realized. We now look for ETH-USD to reach the most recent fractal resistance at $14.45, displayed below, and further bullish momentum is expected if ETH-USD closes above $10.78 this week.
Litecoin has been an exception, showing slight losses so far today. On the other hand, Dash has been the primary beneficiary of the altcoin rally, gaining over 20 percent in less than one day. DASH-USD is now approaching the all-time high at $19.00 where the increasing volume and the green bar in positive territory for the Awesome Oscillator point to a test of the resistance at $19.00.
Ether Classic has also seen large gains, breaking above the key resistance at $1.41, the 50 percent level of the bullish Marubozu formed in July 2016. Therefore, we look for ETC-USD to tend towards the most recent fractal resistances at $2.02 and $2.847.
Monero has continued its upsurge by establishing fresh highs at $17.99. After breaking the previous all-time high at $15.249, bullish momentum is dominating. We expect XMR-USD to tend toward the Fibonacci extension levels at $23.88 and $37.85.
With a flurry of coverage from mainstream media on bitcoin, cryptocurrency is becoming an everyday concept that ordinary people are beginning to grasp. Fresh money and investors are moving into the cryptocurrency space and are setting their sights, not just on bitcoin, but altcoins too.
‘Altcoins’ and ‘cryptocurrency’ searches on Google have started to turn up along with searches of major exchanges, demonstrating increasing interest in cryptocurrency in general, not just bitcoin.
Moreover, the chart below shows the T&C 20 Index, based on the market capitalization of the altcoins and sharing the methodology used to calculate the S&P 500, tracks the value of the overall altcoin sector. We see that the index is in a strong uptrend, indicating more money is flowing into altcoins despite bitcoin’s display of strength.
It remains to be seen whether the simultaneous rally for bitcoin and altcoins is a temporary phenomenon, but we do expect the largest altcoins, such as Monero, Ether, and Ether Classic to continue to display strength even if the bitcoin rally continues.