Article:
An on-chain analyst on X suggests that Bitcoin has diverged from other digital currencies, potentially prompting a sharp market decline in the imminent future.
Why Traders Should Prepare for Potential Market Shifts
In a post dated July 18 on the social media platform X, Joao Wedson, the creator of the crypto analytics company Alphractal, indicated that Bitcoin might face a substantial price drop soon. His analysis is grounded in various results derived from on-chain analysis utilizing three key metrics.
Initially, Wedson highlighted a prior post by Alphractal on X, stating that the market is predominantly driven by long positions. He noted that the impact of these long positions might be short-lived in a market where shorts have been liquidated, a principle that applies in the opposite scenario as well.
The illustration above is from the Correlation Heatmap – BTCUSDT compared to ALTCOINS metric, which maps the paths of the two crypto categories and contrasts them. Using this as a basis, Wedson remarked that altcoins are breaking away from Bitcoin’s influence.
When altcoins stop mirroring the leading cryptocurrency’s movements, this change can be interpreted in several ways, impacting market sentiment. Consequently, increased market volatility is a likely outcome.
Wedson also cited the Altcoin Season Index Vs Bitcoin metric, which assesses whether altcoins are outperforming Bitcoin during a certain timeframe. As per the analyst, this index is currently rising, typically a positive indicator for altcoins.
However, if past patterns hold true, a rising Altcoin Season Index might signal trouble for Bitcoin. Wedson clarified that the Bitcoin market could see a downturn, potentially pulling down the ascending altcoins to restore market equilibrium.
The crypto expert also mentioned the Alpha Quant Signal in his assessment. Wedson noted that this metric indicated a sell, which aligns with recent significant whale activity that increased selling pressure on Bitcoin by offloading a portion of their holdings.
Prospects for Altcoins
Despite the looming market warnings, Joao Wedson remains hopeful about the potential for an altcoin rally, asserting that this may not be the crypto market’s definitive decline. “It’s likely a precursor to the market forming a new price baseline. So, be wary of potential pitfalls along the way,” the analyst advised.
Currently, Bitcoin’s value stands at roughly $117,783, marking a modest 0.2% increase over the past day. In contrast, Ethereum, dubbed the “king of altcoins,” has risen by 2.23% in the same period and is currently priced at $3,562.
