Altcoin traders and investors should look for cover if Bitcoin (BTC) undergoes major price declines.
So believes Filbfilb, an independent market analyst and co-founder of Decentrader trading suite. In a tweet published late Friday, the pseudonymous entity said a 30% crash in the Bitcoin market could prompt altcoins to drop twice as harder.
When Bitcoin consolidated between $50,000 and $60,000 in the March-May period, altcoins exploded. Similarly, the recent correction in the Bitcoin market, which witnessed the flagship cryptocurrency falling from circa $65,000 to as low as $28,000, also had altcoins crash; still, to the levels, they held as support when Bitcoin was stuck in the $50K-$60K range.
Filbfilb noted that altcoins have been facing a so-called “catchup risk,” hinting that even a small downside shift in the Bitcoin market could move altcoins twice lower. The statement appeared as Bitcoin prices plunged to $30,173 following a 15.58% week-to-date downside correction.
“[Altcoins], therefore, carry significantly more downside risk than Bitcoin with [BTC/USD] threatening lows,” tweeted Filbfilb. “If bitcoin were to fall lower, losing another 30% worst case, I’d expect [altcoins] to correct to do 2x worse from here.”
“If bitcoin were to fall lower, losing another 30% worst case, I’d expect alts to correct to do 2x worse from here.”
Bitcoin’s declines across May and June pushed down its year-to-date performance to 5.71%. Meanwhile, while top-cap altcoins fell in tandem, their YTD returns fared far better.
For instance, Ether (ETH), the second-largest cryptocurrency, dropped by a little over 60% from its mid-April peak of $4,384. Nevertheless, its YTD returns came out to be 141% as of publishing time. Similarly, Dogecoin’s YTD profits were 4,112% even after falling by almost 80% from its record high of $0.76.
So it seems, altcoins provided better profit-taking opportunities to their holders than Bitcoin did. As a result, investors could offset their losses in the Bitcoin market by simply selling their altcoin profits for fiat and/or rotate the funds back into BTC.
Bitcoin and $20K
Of late, Bitcoin has been able to avoid a deeper pullback below $30,000 despite repeated attempts.
Many analysts, including Mercuryo founder Alexander Vasiliev, sees Bitcoin’s bullish resilience as a signal that it would eventually breakout above $40,000 and rise to its previous high levels near $64,000 in the mid to long term.
However, some analysts who were previously bullish on Bitcoin have flipped their bias in the wake of the cryptocurrency’s latest bearish correction.
For instance, Scott Minerd, the chief investment officer of the multi-billion dollar investment firm Guggenheim Partners, told CNBC on Friday that he expects Bitcoin to fall to $15,000.
In February, just as Bitcoin was tearing through $30,000-resistance, Minerd has predicted its price to hit $600,000.
Clem Chambers, the chief executive of financial analytics website ADVFN.com, also flipped bearish for Bitcoin, noting that Bitcoin could fall back towards $20,000 owing to capitulation sentiment. He wrote in his SeekingAlpha article:
“The next leg down looks to be here, and it will be the final big move down leading to a repeat of the crypto winter we have endured before.”
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