According to an on-chain analyst on X, Bitcoin has decoupled from other cryptocurrencies or altcoins, which could lead to a severe price downturn within the market over the next day.
Why Traders Should Brace For Impact
In a July 18 post on the social media platform X, Joao Wedson, founder of crypto analytics firm Alphractal, reported that the Bitcoin price might witness a significant drop over the next day. The crypto analyst based his conclusion on multiple results obtained from on-chain analysis using three major metrics.
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First, Wedson referenced an earlier post made on X by Alphractal, saying that the market is currently dominated by long positions. According to the analyst, the effect of these long positions wouldn’t necessarily last long in a market where the shorts have been liquidated — a phenomenon which also holds for the reverse case.
The chart above is from the Correlation Heatmap – BTCUSDT versus ALTCOINS metric, which reads the trajectory of the two crypto categories and compares them. Using the chart as a foundation, Wedson mentioned that altcoins are decoupling from Bitcoin.
When altcoins cease to follow the premier cryptocurrency’s lead, the development could be subject to a couple of interpretations, which affect market sentiment. As a result, it is normal to expect increased market volatility.
Wedson also referenced the Altcoin Season Index Vs Bitcoin metric, which is used to measure if altcoins are outperforming Bitcoin within a specific period. According to the analyst, this Altcoin Season Index is currently on the rise, which is typically a positive sign for the altcoins.
However, if historical trends are anything to go by, a rising Altcoin Season Index might be a negative signal for Bitcoin. Wedson explained that the Bitcoin market might experience a dump, dragging along with it the currently rising Altcoins, to re-establish market balance.
The crypto pundit also cited the Alpha Quant Signal as an influence in his conclusion. Wedson pointed out that the metric flashed a sell, which was expected, seeing as some significant whales recently added to the sell pressure on Bitcoin by selling a fraction of their holdings.
Outlook For The Altcoins
Even as the market flashes ominous signs, Joao Wedson expressed optimism in the viability of the beginning of an altcoin rally, saying he doesn’t believe this is the final leg down for the crypto market. “But it’s likely a sign that the market is about to form a new price base. So be cautious with the traps that might show up along the way,” the analyst added.
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As of this writing, Bitcoin is valued at about $117,783, reflecting a mere 0.2% price increase in the past 24 hours. Representing the other camp, Ethereum, the “king of altcoins,” jumped by 2.23% in 24 hours and is currently valued at $3,562.
Featured image from Shutterstock, chart from TradingView